In another in-depth look at Trump’s future and Obama’s past, it’s worth noting their opposing views in terms of global economics. Obama followed a relatively traditional path, and the results have been underwhelming at best. Trump is ready to completely overhaul how America approaches global trade, and his plan might further reshape politics as a whole. On that note, let’s take another look at Trump vs Obama, and this time we’ll focus specifically on global economic policy.
History
Before we get into big comparisons, it’s important to frame the discussion with a little history. Before WWII, international trade was heavily constricted by transportation. When airplanes and faster ships could finally bridge those gaps, the world was cast into the Cold War. So, it wasn’t until 1989 that a truly global economy could even begin to emerge.
During the 90s, the U.S. was so dominant in its economy that it really needed to invest in the rest of the world to help them catch up. That led to obvious trade deals that were excellent for countries that wanted to expand production and entice American investment, and the end result was that the U.S. was importing far more than exporting across the board.
Compare that situation to today. Germany, Japan, even Russia and China all have the means to trade heavily with the U.S. The biggest socialist powers have freed large sections of their economies, and the world is not too far from a point where a country could completely circumvent the U.S. in all of its trade. That means the future of development and trade no longer hinges solely on American investments, so a new approach is reasonable. Comparing what did and didn’t work under previous presidents to the Trump approach will highlight this.
Internal Regulation
Obama was far from an innovator. His regime followed directly in the footsteps of his predecessors, and he mostly pushed for internal regulation to control American production, trade and job management.
A few example practices of this are the 35 percent tax on money made overseas by American companies, increased legislature in the vein of Affirmative Action and production regulations that fall in line with EU or other international regulators. Some of these concepts made sense 20 years ago. When international competition was light, regulation had to face inward to protect consumers and workers.
Conversely, Trump is aware of how the different global climate calls for a change in these practices. Major corporations have no incentive to repatriate foreign cash, so there is no chance of it being invested in the U.S.
Trump wants to slash the tax to accomplish two goals: a smaller tax rate on larger sums of money will improve tax revenue and compelling U.S. companies to invest the hundreds of billions of stagnant dollars back into production will spur the economy far better than any government stimulus package could hope to do.
Protectionist Policy
The other changes to Obama’s approach spill into this next topic. In the 90s, American companies needed no protection from the federal government. Trade agreements could favor the developing economies because they couldn’t keep up in production or quality. Now, competition is fierce, and jobs continue to leave the country because of those trade agreements that were intended to put the U.S. at a disadvantage.
At this point, increasing internal regulation on domestic production only further handicaps those facilities, and it accelerates the loss of jobs. By changing or leaving the outdated agreements, the U.S. can use tariffs and other tools to bring the playing field back to even. This is the core of Trump’s international economic approach, and it leads to the final and most important point.
Politics by Trade
Trump knows that conditions no longer favor American production, but the U.S. is still far and away the largest consumer and buyer. Rather than relying on threat of force or traditional sanctions, Trump is ready to use the overwhelming trade deficits to negotiate, and this is the major point of difference between the two presidents.
Obama reinforced with his policies outdated interventionism that completely failed. With the EU and most of Southeast Asia completely reshaping their economies, the old tactics just won’t cut it. Trump’s use of forceful negotiation via trade deficits and tariffs is more compelling to the rest of the world than anything that came from Obama’s office. For conformation, simply look at how many countries are eager to negotiate trade deals and treaties since Trump was elected.
Regards,
Ethan Warrick
Editor
Wealth Authority
