Friday, December 2, 2016

The Potential For Very Bad Inadvertent Policy Impacts of Trump's Trade Policies




     This week, president-elect Trump directly intervened in the private economy.  He negotiated directly with the Carrier Corporation, getting them to agree to keep an Indiana factory in the U.S..  He has also said that renegotiating NAFTA is a top priority, along with increasing export and import tariffs to prevent U.S. companies from moving abroad.

     Above is a chart showing that real exports as a percent of GDP are now greater than 12% of real U.S. GDP.  While we don't know the exact parameters of Trump's policies, we do know that the law of unintended consequences tells us that for every policy action, there may be a large number of inadvertent policy results.  Trump's policies have the potential to seriously unbalance 12% of the U.S. economy, which may negatively ripple through other economic sectors.