1/27/2016—I have been perplexed that the market jumped when Donald Trump became President. After all, Trump is so crazy and the markets, it is said, like stability.
Well, it turns out that markets really like low taxes and little regulation because in the short term that helps rich people make money and keep the money they make. (It does not do that in the short term because you need to sell things to regular people and regulations make economic activity sustainable—see the 2008 crisis).
But now we have a reminder that Trump is not just a typical Republican—he is in fact, well, odd. Now he and his Party are talking about a 20% tariff on goods imported from Mexico to pay for a wall we don’t need in the first place. This is just stupid and I believe would violate existing treaties, which are the law until scrapped. By next week, this should become clear and the markets should go down on the news. Unless the plan is scrapped.
But the main point is that the free flow of goods is good for the economy. This tax if enacted will finally show this to people perhaps. Finally, economists close to politics, like Krugman will have to get their hands dirty. The Democratic Party will have to come up with a real plan on trade that actually is good for everybody. Maybe we will have a real debate finally.