Forget everything you know about the rules of classic economic theory. Forget everything you know about the rules of diplomacy. Forget everything you know about everything. President Donald Trump has rewritten the presidential rule book and it only took him two days.
Within the first 100 hours of his presidency, President Trump has already signaled his campaign rhetoric wasn't just rhetoric and that he may have meant what he said. Ironically, if Trump follows through on said campaign promises, he will have added a refreshing twist to U.S. politics. Politicians that do what they say? What's next, campaign finance reform?
Trump's first actions as President included steps to curtail Obamacare ahead of Congressional action meant to repeal it altogether. He signaled he would cancel the U.S.-Iran accord that would lift sanctions on Iran should they abandon all technologies that would result in nuclear weapons. He also mentioned that he was saddened that the United States did not "keep" Iraqi oil after successfully replacing Saddam Hussein. While addressing CIA employees on his first official visit anywhere following the inauguration President Trump said, "Now I said it for economic reasons, but if you think about it, Mike, if we kept the oil, you probably wouldn't have Daesh because that's where they made their money in the first place, so we should have kept the oil. But, okay, maybe we'll have another chance." The Mike in the quote is Congressmen Mike Pompeo, who is all but certain to take over the reins at the CIA this week.
Trump's suggestion that the United States may have another chance at keeping Iraqi oil echoes his earlier remarks from 2011 in a Wall Street Journal interview in which he said, "You heard me, I would take the oil. I would not leave Iraq and let Iran take the oil." He later clarified his remarks to ABC News in which he said, "You're not stealing anything. We're reimbursing ourselves, at a minimum, and I say more. We're taking back $1.5 trillion to reimburse ourselves." In September during a campaign speech, "We go in, we spend $3 trillion, we lose thousands and thousands of lives, and then what happens is we get nothing. You know, it used to be to the victor belong the spoils."
Statements such as these have left many Americans apprehensive about Trump's intentions. While many dismissed his campaign speeches as either prerequisite rhetoric necessary to gain votes or simple populist pandering, it appears Trump was serious. Will the "America first" doctrine translate into an improved U.S. economy four years from now? It's probably too early to tell.
President Trump spoke with both the Canadian and Mexican leaders and hinted that these conversations were the first of many in which the United States would "renegotiate" the North American Free Trade Agreement, or NAFTA. Should NAFTA be scrapped the U.S. consumer would immediately have to pay much higher prices for goods that are currently duty-free. Such protectionist economic policies are in direct opposition to the principles of modern economics. Perhaps the only situation in which protectionism could work is in which the domestic market produces goods that could easily be substituted and said goods had similar cost structures. Unfortunately, this is practically never the case for U.S. goods. If the United States imposed a 200 percent tariff on televisions, for example, they would still be much cheaper to buy from the Far-East. Such action would only force consumers to pay more, which amount to what is essentially a regressive tax.
President Trump also commented two days before his inauguration that the strength of the dollar "is killing us," hinting that he'd like to see the hard currency weaken against foreign currencies. Such actions would bolster U.S. manufacturing already hit hard from a weakening euro and other foreign currencies. If the prices of U.S. imports are too high, foreign countries begin to look to other markets to replace U.S. goods. If Trump intends to simultaneously push for higher interest rates as he has indicated he has, it will be difficult to weaken the U.S. dollar as demand for the yield-rich currency will only continue to increase.
While the first few days of Trump's presidency have been marred by worldwide protest and his words have hinted at continued global conflict, in truth, this is the Donald Trump that ran for president. Those that don't agree with his policies should do better in coming up with alternatives to Trump, otherwise it's going to be a very long eight years.