Trump’s Protectionist Policies Would Reignite Inflation | Opinion

With the presidential election weeks away and still looking like a true toss-up, we face the very real prospect of a second Trump administration. With that in mind, it makes sense to ask how Trump’s policies would affect the soft-landing our economy is now experiencing. In so doing, it becomes rather evident that the former president’s protectionist policies would almost certainly unravel this hard-won economic stability. In particular, Trump’s proposed approaches to trade and immigration would undoubtedly reignite the inflationary fires we worked so hard to put out.

Trump’s approach to international trade, characterized by increased tariffs on imported goods, reflects a mercantilist perspective that runs counter to modern economic understanding. This viewpoint, which prioritizes trade surpluses and domestic production over the benefits of free trade, ignores the crucial concept of comparative advantage, a cornerstone of economics that explains why nations benefit from specialization and trade.

The imposition of tariffs on imported goods may seem like a straightforward way to boost domestic manufacturing. After all, if making goods overseas is cheaper, a tariff can change the math such that domestic production becomes more competitive. However, this thought process oversimplifies the complex realities of global supply chains and domestic production capabilities. American businesses cannot simply flip a switch to produce goods that have long been imported. Building the necessary infrastructure and developing the required expertise takes substantial time and investment. Which, with Trump having a maximum of four years in office, no rational business would want to make said investment with the knowledge that the next Democratic President is likely to reverse his policies.

Moreover, these tariffs are antithetical to conservative ideology as they effectively function as a tax on American consumers and businesses. When the cost of imported goods rises, it’s not foreign producers who bear the brunt, it’s American consumers. This increased cost of inputs for businesses and finished goods for consumers would directly contribute to broad inflationary pressures all because the heavy hand of government decided to intervene in the free market.

Compounding this inflationary issue is Trump’s proposed hardline stance on immigration, particularly his call for mass deportations of undocumented immigrants. While often framed as a matter of law enforcement, this policy overlooks the significant economic implications, especially for labor-intensive sectors like agriculture and manufacturing.

The agricultural industry in particular has long relied on immigrant labor, both documented and undocumented, to keep food production costs manageable. A sudden and severe reduction in the supply of workers in this workforce would in turn lead to dramatically increased labor costs, which would inevitably be passed on to consumers in the form of higher food prices. This is not a hypothetical scenario; we’ve seen glimpses of this effect in states that have enacted stricter immigration enforcement, resulting in labor shortages and increased production costs. It is also why states like Texas that are dependent on this labor never seriously consider reforms that would actually make it difficult for immigrants to work there.

The obvious fact is that, as the labor pool shrinks due to deportations and reduced immigration, wages will have to rise across various sectors as companies compete for workers. While increased wages can be beneficial for those workers, when not matched by productivity gains, they tend to contribute to inflationary pressures. Simultaneously, the increased costs of imported goods due to tariffs would further drive-up prices across the board, more than negating the worker’s wage gains.

Proponents of these policies might argue that such short-term pain is necessary for long-term gain in terms of American job creation and economic independence. However, this perspective fails to account for the realities of our interconnected global economy. In today’s world, economic isolationism is more likely to lead to stagnation than prosperity.

Instead of reverting to outdated and interventionist protectionist policies, a more effective approach to economic growth and stability would involve investing in education, infrastructure, and innovation. These investments can enhance American competitiveness without resorting to measures that risk inflationary consequences.

As we navigate the complex economic challenges of our time, it’s crucial to consider the full ramifications of proposed policies. While the desire to protect American workers and industries is understandable, we must be wary of solutions that may ultimately do them more harm than good. In the case of Trump’s proposed trade and immigration policies, the risk of fueling inflation and reducing overall economic welfare is a concern that deserves serious consideration in our national debate.

Nicholas Creel is an associate professor of business law at Georgia College & State University.

The views expressed in this article are the writer’s own.