I was on a rare vacation trip (most trips for me are work related) when my wife and I decided to enter the country. haunted house in Tivoli for fun (last visit it had been closed to renovate the wax museum into something new). Well, it wasn’t scary at all – but it got me thinking: what would be scary? Here is my answer :
“Economic policy in a second Trump term”
Consider some policy proposals:
“It is literally impossible for tariffs to completely replace income tax. To replace the income tax, tariff rates would have to be incredibly high on such a small import base, and as tax rates increased, the base itself would decline as imports would decline, making Trump’s $2 trillion goal unachievable.”
And I didn’t even think about it…
Nice discussion here about how Trump’s policies would make the inflation/output trade-off a nightmare.
Just as a reminder, here is the US trade balance defined from NIPA data.
Figure 1: U.S. net exports relative to GDP (blue), based on whether the NBER defined peak-to-trough dates of the recession in gray. Source: BEA 2024Q1 2nd version and author’s calculations.
And in terms of political uncertainty (which conservatives used to denounce as a slowdown in investment and growth):
Figure 2: Economic policy uncertainty (blue, left scale) and trade policy uncertainty (beige, right scale). The NBER has defined the peak to trough dates of the recession in gray. Source: policyuncertainty.com via FRED, NBER.
