Trump’s recent statements on the economy are even more bonkers than usual | Steven Greenhouse

‘Economists and corporate executives were especially alarmed by two Trump statements.’ Photograph: Aaron Schwartz/Pool/Aaron Schwartz - Pool/CNP/ShutterstockView image in fullscreen‘Economists and corporate executives were especially alarmed by two Trump statements.’ Photograph: Aaron Schwartz/Pool/Aaron Schwartz - Pool/CNP/ShutterstockOpinionDonald TrumpTrump’s recent statements on the economy are even more bonkers than usualSteven GreenhouseOur ‘genius’ president is revealing his ignorance of economics, fueling concerns about the threat he poses to the world

But in the days before and after that post, Trump made one mind-boggling statement after another, including one that raised the possibility of cutting off all trade with dozens of the US’s trading partners. The president’s statements had many experts questioning not just his intelligence, but also whether he – and the outlandish policies he was proposing – were a clear and present danger to both the US economy and the world economy. Public respect for Trump’s economic sense has fallen so low that just 7% of Americans think he should take the lead in regulating AI, according to a recent WSJ poll.

Responding to Trump’s reckless statements, one prominent advocacy group, Republicans Against Trump, derided him as “Dumbest. President. Ever.”

Economists and corporate executives were especially alarmed by two Trump statements. First, he wrote on Truth Social: “I’ll stop trading with countries with which we have a deficit” if the Federal Reserve doesn’t cut interest rates.

The second disconcerting statement was: “If we stopped Trading with every country that we have a Deficit with, which is most of them, we would make, at least, 1.5 Trillion Dollars a year.”

Not only is Trump’s arithmetic childishly silly here, but any college student who took Econ 101 knows that if a trade-dependent nation like the US suddenly ended all trade with dozens of countries, that would lead to economic disaster. What’s more, it was worrisome that Trump views himself as almighty emperor with the power to singlehandedly halt hundreds of billions of dollars in trade.

If Trump ordered the US to terminate all trade with every place with which it has a trade deficit – that includes China, Mexico, Taiwan and the European Union – many US manufacturers would quickly find themselves in desperate straits, unable to obtain critically needed computer chips, rare earths, auto parts, aluminum and much more. As a result, many factories would be forced to close. Not only that, many farmers would be crippled because they couldn’t import the fertilizer they need, while many homebuilders would have to stop work because they couldn’t import needed lumber.

Two days before the Federal Reserve raised its short-term interest rates to 3.75% to 4% to combat inflation, Trump was on a tear, badgering and bullying the Fed, telling it not only not to raise interest rates, but to cut rates sharply. “We should be at 1% or half a percent,” Trump said. Again, anyone who took Econ 101 knows that cutting rates so sharply and so low will push prices skyward at a time when the Fed and consumers already think inflation is too high. And let’s not forget that Trump was the guy who promised to reduce prices on day one as president.

With that statement, the self-described “stable genius” president showed his utter failure to understand one of the most basic teachings of Econ 101 – when interest rates are extremely low, like 1%, that heats up the economy and that revved-up economic activity fuels inflation. The University of Michigan economist Justin Wolfers called Trump’s demand for a 1% interest rate “the dumbest thing ever said by a president”.

Then there was this whopper. Trump said that if the Fed bowed to his demands and slashed interest rates, “we could have a GDP [growth] of 14, 15, 16 and 20.”

Those numbers are absurd, fantastical. Considering that the US economy grew at a moderate 2.2% rate in this year’s second quarter and rarely grows faster than 5%, talk of 20% growth is delusional. Since the second world war, the US economy has grown at a rate at 20% or higher just once. That happened in the third quarter of 2020 due to extraordinary circumstances – in that quarter, myriad businesses rushed to reopen after the worst pandemic in a century caused many to suddenly shut down during the previous quarter. (GDP plunged at a 28% rate that quarter.)

Then there was this colossally wrong-headed statement about trade: “The word ‘Deficit’ is nothing more than a fancy word for LOSS.” Trump coupled that assertion with his misbegotten statement that the US would magically be $1.5tn richer if it terminated all trade with every nation with which it has a deficit.