I know that there are plenty of Trump admirers among Speccie readers. And there were certainly aspects of his time as President that I fully endorse. But when it comes to economic policies, Trump treads on very weak ground. Alas, it’s not clear that Biden’s approach to economic policy-making is any better.

Before I compare the policies of the two leaders, let me make a general point about the American economy. Notwithstanding some very poor policy settings at both the federal and state levels, the US economy is remarkably resilient. There’s still plenty of can-do about, plenty of innovation and plenty of resilience.

Where the productivity performances of most advanced economies have gone backwards – that’s right, not slower growth, but actually lower productivity – the US continues to forge ahead.

As Greg Ip has remarked in the Wall Street Journal recently, the US economy is the largest in the world and has actually pulled ahead from its competitors, including China. The US economy currently accounts for over 26 per cent of the world’s GDP, the highest percentage recorded in two decades.

‘According to the International Monetary Fund, Europe’s share of world GDP has dropped 1.4 percentage points since 2018, and Japan’s by 2.1 points. The US share, by contrast, is up 2.3 points. China’s share is up since 2018, too. But instead of overtaking the US as the world’s largest economy, the Chinese economy has slipped in size to 64 per cent of the US’s from 67 per cent in 2018.’

Like a number of countries, including Australia, the labour market in the US is remarkably strong, with the rate of unemployment sitting at just below 4 per cent. There are plenty of jobs and real wages have been rising.

To be sure, inflation remains a problem in the US, with the most recent recording putting the rise in consumer prices at around 4 per cent which compares with the target rate of the central bank – the Fed – of only 2 per cent. The official interest rate in the US is close to 5.5 per cent and the yield on 10-year Treasury bonds has edged up to 4.7 per cent.

In other words, it’s not all sweetness and light, but it remains the largest and richest economy in the world.

Why would I have misgivings about the economic policies of Donald Trump? The large cut to the corporate tax rate he implemented while President was in the right direction although his lack of attention to fiscal discipline was alarming. More generally, the fiscal position in the US looks to be out of control, something that was put in train by Trump.

The stimulus spending associated with Covid was over-the-top by any measure, amounting to around $US10 trillion in new spending. The current budget deficit is close to 6 per cent of GDP. Recall here that Australia will have recorded two budget surpluses in 2022-23 and 2023-24.

Ruchir Sharma notes in the Australian Financial Review that, ‘In the years since the start of the pandemic, rising deficits amounted to a cumulative 40 per cent of GDP in the US, twice the average in Europe, and a third higher than in the UK.’ Trump must bear some of the responsibility for this outcome.

But leaving budget management to one side – bear in mind that the US can afford to run large deficits as the largest economy with an essentially numéraire currency – Trump has some very strange ideas on international trade and the need for tariffs and other trade barriers. He was aided in this wonky thinking by his adviser, economist Peter Navarro, who is currently serving a jail sentence after being found in contempt of Congress. (I make no judgement on this development.)

According to Trumpian thinking, any trade deficit that the US runs with any country is a form of theft of US citizens. The fact that there is a large US-China trade deficit has offended Trump and must be remedied by high tariffs and other trade barriers. He fails to understand the principle of comparative advantage and the way international finance works. The fact is there is no reason why bilateral trade flows need to be in balance.

Don’t get me wrong here, there are plenty of distortions and dirty tricks when it comes to international trade. China should never have been granted membership of the World Trade Organisation and the status of developing country at the beginning of this century.

But the world can thank Bill Clinton for that one. He was working on the faulty assumption that greater economic liberalisation for China would eventually lead to political liberalisation and ultimately full democracy. He even thought that China’s human rights record would improve. Mind you, he wasn’t alone in this thinking – our own Department of Foreign Affairs and Trade was a pushy advocate of this line.

Trump’s view of international trade led him to impose a series of tariffs on Chinese products – generally around 25 per cent.   It is interesting to note that Biden has left these imposts in place. But Trump has now signalled his intention of upping the rate of tariffs on Chinese products, including motor vehicles, to 100 per cent.

He also wants to clamp down on the trade dogleg used by Chinese manufacturers to route their product through Mexico – some additional processing may take place – and take advantage of the Nafta trade concessions.

It’s clear that a trade war would do nothing to ease the cost-of-living pressures on middle America. After all, tariffs are essentially a tax on the poor. But these consequences are unlikely to deter Trump.

This analysis is not set down to excuse the very faulty suite of economic policies implemented by the Biden administration. The Inflation Reduction Act has had the reverse impact – it has kicked inflation along – while providing immense sums of money for the construction of green boondoggles around the country. Laughably, his Chips Act has gone nowhere, stalled by the preposterous ‘equity’ conditions attached to the grants.

Biden has mercilessly used his executive powers to impose a series of bad polices. His vehicle emissions policy has now had to be watered down because American consumers are increasingly baulking at purchasing electric vehicles notwithstanding the subsidies that are available.

And while Biden has tried to make life more difficult for oil and gas producers, the industry continues to grow. The US is currently the largest producer of petroleum products in the world.

Trump versus Biden: when it comes to economic policies, the news is bad. Both men have a very poor grip on the principles of good economic policy making. This said, the US economy is such a resilient powerhouse that the effects of poor policies are often muted.

The same cannot be said for small open economies like Australia’s.