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Donald Trump’s election as president of the United States, despite being twice impeached and guilty of myriad crimes, will have major consequences for climate change, inflation and geopolitics. By Mike Seccombe.
THIS IS NOT GOOD
It looks like a clean sweep. Not only has Donald Trump won back the presidency he lost four years ago, but his Republican Party – and it is truly his party now – will control the United States Senate, and likely also the House of Representatives.
“It’s a political victory that our country has never seen before, nothing like this,” he said in his victory speech on Wednesday evening, Australian time.
The fact that he is only the second person ever elected to non-consecutive terms is the least remarkable thing about his victory.
More remarkable is that so many Americans voted for a twice-impeached felon who, on the false assertion of a stolen election, encouraged his followers to storm the congress. A businessman who has filed six bankruptcies and cheated on his wife, his taxes and at golf. Who misled or lied to the people 30,573 times in his first presidential term, according to The Washington Post’s fact checkers. Who sent vaccines to a Russian dictator during a pandemic that killed more than a million US citizens. His own top general called him a fascist and multiple other former close aides, and rational Republicans, condemned him as unfit to govern.
How could a majority of Americans vote for a man who, as Maureen Dowd succinctly put it in The New York Times last week, “simply has no character”?
The pundits cite many factors. His opponent Kamala Harris is a childless woman, so misogyny might have played a part. She is the daughter of migrants from Jamaica and India, so racism could have been involved. She hails from liberal California.
Harris did not have much time to make an impression on voters, becoming the Democratic Party candidate only after Joe Biden stepped out of the presidential contest in late July. Tied to his legacy, she could not define her difference in a “change” election.
In essence, though, the explanation was quite simple, as Arthur Sinodinos, former Liberal Party staffer, politician and ambassador to the US, pointed out during the ABC’s election coverage: when Trump asked US voters if they felt better off now than four years ago, they did not.
Bruce Wolpe, senior fellow at the United States Study Centre, sees it the same way.
“I don’t think it was complicated,” he tells The Saturday Paper. “The basket of goods that they buy week in, week out, petrol and stuff, plus services, are all between 10 and 40 per cent more expensive. The lived experience is bad and households are under pressure. And the economy is the No. 1 driver of voting intentions.”
By many measures, however, the American economy is strong. It has recovered from the pandemic recession and subsequent burst of global inflation better than almost all other economies. Price growth had fallen to an annualised rate of just 2.4 per cent by September. The central bank had already begun cutting interest rates. US GDP grew at an annualised 3 per cent in the second quarter of the year.
Under the Biden–Harris tenure, the country added some 16.2 million jobs. It shed 2.7 million over the course of Trump’s first term.
A booming sharemarket fattened workers’ 401(k)s – the American equivalent of superannuation. According to calculations on CNN last week, the 500 top stocks grew at a compound rate of 14.1 per cent during the Biden–Harris years.
The economic benefits were not evenly shared, but Biden–Harris are not particularly to blame for that. The disparity in rewards between old-economy jobs such as manufacturing in rust-belt middle America and new-economy jobs performed by tertiary-educated workers had been growing for decades.
Voters blamed Democrats for inflation. They were tired of seeing the US spending their money on other people’s wars. They saw a flood of undocumented migrants as a threat to their livelihoods, if not their safety. They focused on the jobs that had been offshored. Trump encouraged their grievance.
Pre-election polls showed the presidential contest was tight, giving hope to Democrats. They might have been less hopeful if they considered what other polling was showing about the mood of the people. Consistently, surveys found they were unhappy with America’s trajectory. The week before the election, an ABC/Ipsos poll found 74 per cent of voters thought the country was heading in the wrong direction.
They wanted a radical course correction, and Trump offered one: nativism, nationalism, isolationism and simplistic mercantilism. Policy experts say it will be bad for his supporters and for the world in general, but his right-wing populism despises experts.
Foremost on his agenda is the mass deportation of undocumented immigrants, of whom there are many millions.
It’s been done before, says Warwick McKibbin, professor of economics and public policy at the Australian National University. In the 1950s, the Eisenhower administration’s “Operation Wetback” saw up to 1.3 million Mexicans deported.
McKibbin, an internationally renowned economic modeller, was part of a group that analysed the likely consequences of Trump’s proposal for Washington think tank the Peterson Institute for International Economics.
For a start, says McKibbin, Trump’s plan would be enormously complicated – a majority of the estimated 11 million undocumented workers in the US are not from Mexico. They would likely wind up in “concentration camps … they’re not going to be able to send them overseas, because there’s nowhere to send them”.
The study’s point, though, was not whether the proposal was feasible in logistical terms but whether it was worth it in economic terms. The answer was a resounding no. The Trump plan would deprive the US of about 5 per cent of its labour force, says McKibbin, “which is a supply shock, so food and other things would become a lot more expensive”.
It would reduce investment, depreciate the value of the US currency, “which causes another inflation impulse coming through the exchange rate”.
It would blow out the already large US budget deficit (the US debt-to-GDP ratio was more than 120 per cent in 2023/24, roughly double what it was in 2006/07), because those interned or deported workers would no longer be paying tax.
“By 2028, which is the end of his term, the economy is around 7 per cent smaller than it would otherwise have been, which means almost no growth between now and then,” says McKibbin.
And consumer prices would be 20 to 28 per cent higher.
Of all Trump’s promises, he says, this would be the most damaging to the American economy. For the rest of the world, another Trump promise would be more problematic.
During the campaign, Trump called himself “tariff man”, and pronounced these taxes levied on imported goods “the greatest thing ever invented”.
As the Nobel Prize-winning economist Paul Krugman has noted, this sort of protectionism would turn the economic clock “back 90 years”, to a time before tariffs were found to be generally economically counterproductive. In 1933, US tariffs averaged about 18 per cent, before being progressively unwound. For the better part of the past 20 years, US tariffs stood at 1 to 2 per cent of import value.
The re-elected president’s promise on the subject is typically vague. Initially he said he would impose a uniform 10 per cent levy on all imports, except those from China, which would be 60 per cent. He later upped the general rate to 20 per cent.
“Tariffs are, almost by definition, inflationary,” says independent economist Chris Richardson. “Trump is promising – and has a good chance of delivering – a great big tax on everything.”
This would hit US consumers, of course, but also affect every country exporting into the US, particularly Australia.
This country has managed to escape Trump’s tariffs before, notes Simon Jackman, a political and data scientist and honorary professor at the University of Sydney. When US steelmakers successfully lobbied for tariffs during Trump’s first term, Australia’s BlueScope was caught up in it. Counter-lobbying by Australia won a reprieve.
“It was one of the successes [then Australian ambassador to the US] Joe Hockey got to crow about,” says Jackman.
The fact that Australia had a large trade deficit with the US probably helped, given Trump’s mercantilist view on the matter.
So, too, did the fact that Hockey was a Trump golfing partner, Jackman suggests. “One of the hallmarks of the way Trump does business is that it is transactional, person-to-person. Personal relationships are particularly important.”
He wonders if we will be so successful again. Australia’s current ambassador, Kevin Rudd, is not a Trump buddy. He once tweeted that Trump was “the most destructive president in history” and that he “drags America and democracy through the mud” – posts now deleted from his account. In a recent interview, Trump called Rudd “nasty” and claimed he “won’t be there long” as ambassador.
“Trying to get those carve-outs for Australia means going in and making the case and reminding Trump and the Trump inner circle that we’re on the team, we’re the good guys. And if you can’t get access in there, if Rudd is not able to rehabilitate himself … it’s going to be really tough,” says Jackman.
Even assuming Australia does manage to get a reprieve from the proposed tariffs – we do, after all have a free-trade agreement with the US – McKibbin’s modelling still projects damage.
“The country most affected [by the proposed 60 per cent tariff on Chinese exports to the US] is China. The second-most affected is the US, in terms of growth. And the third is Australia … because we export a lot of energy and minerals to China, which converts it into products going into the US,” he says.
Renewed tariffs, says independent economist Nicki Hutley, would clearly be inflationary in the US – ironic given that a major reason Americans voted for Trump was because they were angry at price increases. “Whether it would drive inflation elsewhere is less obvious. You might find that if US demand falls for Chinese products, a certain amount of dumping could go on elsewhere in the world.”
Which could lead to defensive tariffs by other countries, Hutley says. “Once the US starts doing it, then China starts – it’s tit for tat – then everybody else jumps in.”
Trump’s radical economic plan extends further. He has promised huge tax cuts, which according to credible analyses would increase the US deficit by three to four trillion dollars over a decade.
He wants to slash government spending. Elon Musk, a founder of Tesla and SpaceX, buyer and debaser of Twitter – now X – and the world’s richest person, would be in charge. Musk has titled his prospective role “Department of Government Efficiency” or DOGE, after his favourite cryptocurrency. He has said he aims to cut at least US$2 trillion – or about 30 per cent – from government spending. This would have dire consequences for the US’s already minimal social safety net.
Trump has indicated he could take over, either directly or indirectly, the role of interest rate setting from the central bank, which McKibbin and Hutley predict would cause a flight of capital from the US.
“If there were any sign that there was going to be political interference in monetary policy decision-making … even the hint of it would unnerve markets,” Hutley says. She and Jackman both observe that he might get pushback on that idea from Republicans concerned about the impact on business.
Beyond economic policy, Trump has promised to put the failed presidential candidate Robert F. Kennedy Jr – a vaccine sceptic who has promised to immediately remove fluoride from America’s water supply – in charge of health policy.
“He’s going to help make America healthy again,” said Trump in his victory speech. “He wants us to do some things, and we’re going to let him go to it. I just said, ‘But Bobby, leave the oil to me.’ ”
Trump’s fondness for autocrats in general and Russian President Vladimir Putin in particular will likely mean big changes to foreign policy. Trump wants to stop US military aid to Ukraine. His first term was marked by US withdrawals from a range of international bodies concerned with trade, human rights and other matters. He white-anted NATO and the United Nations.
Perhaps most consequential of all, given it is the biggest problem of all, Trump will likely reverse America’s efforts to combat climate change and environmental degradation. His pledge is to “drill, baby, drill” for oil and gas.
During Trump’s previous term, notes Hutley, who is a climate councillor as well as an economist, Trump pulled the US out of the Paris climate agreement and “kneecapped” the Environmental Protection Agency. In all, he rolled back some 100 climate/environment rules and initiatives.
“The Paris Agreement talks about proportionate and fair responsibilities. There’s a responsibility amongst developed economies to do more. If you start to see the US pull back, then others will say, ‘What’s the point?’ ”
Elon Musk might persuade Trump to “keep going in the right direction on climate, even if that’s only supporting his electric vehicles interests,” Hutley says.
Nevertheless, it’s going to be hard to stop Trump doing whatever flaky thing he wants. He owns the Republican Party. He owns the Senate and, via three appointments in his first term, the Supreme Court. Even if the Democrats do manage a narrow win in the House, they will wield little influence.
In his victory speech, Donald Trump said he would govern by a simple motto: “Promises made, promises kept.”
The first time around, by many accounts, a combination of inexperience and principled objection within his administration prevented Trump from executing at least some of his agenda.
Trump redux, however, looks like Trump unbound.
This article was first published in the print edition of The Saturday Paper on November 9, 2024 as "THIS IS NOT GOOD".
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