Economics of Donald Trump also known as Maganomics is Nationalism, Deregulation and State Capitalism. It is protectionism combined with tax cuts and decreased government intervention – a model that may lead to systemic financial risks.
The economic policies of Trump are high tariffs, tax cuts for the rich and a strong anti-immigration policy. His plan is reminiscent of the past, citing McKinley’s tariff led policy in the past and also incorporating the libertarian principles of the likes of Elon Musk. However, there are a number of inconsistencies. While protectionist policies are meant to enhance the local industry, they usually come with higher prices for the consumer. Also, cutting taxes and shrinking the IRS at the same time limits revenue collection and thus increases the U.S. fiscal deficit.
One of the main features of Maganomics is the application of state capitalism in order to benefit Trump-related corporations. For example, Musk’s Starlink and other companies favored by Trump are going to benefit from the changes in regulations. In the same way, Trump’s proposal for a strategic crypto reserve is problematic as it would mean redirecting wealth from traditional financial markets.
Although there are many inconsistencies in Maganomics, it is still politically feasible because it is based on fear and personal gain. Managers may hate the tariffs, but they will keep quiet for the tax advantages. It is doubtful that any Republican politician will risk Trump’s wrath and confront him. Nevertheless, the long-term sustainability of the economic policy and the deregulation of the financial sector greatly increase the probability of a future economic crisis.
Maganomics may not fade away slowly but may explode into a sudden financial crash. Weakening of financial regulations and high growth of debt may lead to the collapse of the markets and make a severe economic downturn almost inevitable. As we can see from the history of economic experiments, this model may not end with small changes, but with a financial catastrophe.
