Süleyman C. Karaman
Recently, with Donald Trump’s return to the presidency, not only America but the entire world has entered a new era. Following the populist policies of the American right, Trump is a nationalist, anti-immigrant, economic protectionist, culturally conservative leader who favors low taxes and constantly speaks against social programs. However, what he will actually be able to achieve remains to be seen over time.
Changing the established order and shaking up entrenched interest groups is never easy. When Trump was first elected, he promised to change many things but failed to deliver on most of them. Despite repeatedly declaring that he would “drain the swamp” in Washington, D.C., it’s evident that little has actually changed.
One of the most controversial topics in Trump’s return to power is the involvement of Elon Musk in the administration. The law aimed at reducing the federal workforce to ease the government’s budget burden has proven to be highly unpopular. Musk has made critical decisions that contributed to the success of his companies—Tesla, SpaceX, and X.com—turning them into some of the world’s most influential firms. However, running a country is vastly different from managing a private business. A nation cannot be governed like a corporation.
Protectionist Economic Policies
One of the core elements of Trump’s political rhetoric is protectionist economic policies. Since the U.S. dollar has long been valued higher than other currencies, American manufacturers face disadvantages in exporting their products. To gain the support of the middle class, Trump has promised to devalue the dollar to help domestic producers. However, his other policies, such as increasing tariffs, would actually lead to a stronger dollar.
The fact that the dollar appreciated as soon as Trump won the election reflects the market’s expectation that his economic policies would push the dollar’s value higher. If tariffs increase, the price of imported goods will rise, fueling inflation. In response, the Federal Reserve will likely keep interest rates high to combat inflation. Higher interest rates on the dollar will increase demand for it, driving its value up even further.
Higher tariffs directly raise the prices of imported goods, while tariffs on raw materials increase the costs of domestically produced goods indirectly. Studies show that the revenue generated from tariffs never fully compensates for the higher prices that consumers pay. While tariffs are intended to protect domestic manufacturers from foreign competition, they often reduce competitiveness and simply allow these businesses to raise prices and increase profit margins without making real improvements.
For example, imposing high tariffs on Chinese electric vehicles might shield American car manufacturers from competition. However, instead of improving their products, these companies might simply raise their prices, leading to a scenario where American consumers pay more for lower-quality vehicles in the long run.
Do Tax Cuts Devalue the Dollar?
Another Trump policy that could strengthen the dollar is tax cuts. Tax reductions increase disposable income, leading to higher consumer spending. Increased demand can result in inflation, ultimately driving the dollar’s value up.
However, tax cuts also have significant negative effects on income distribution. The U.S. government has been running budget deficits for years, and national debt continues to rise. The goal of tax cuts is to leave more money in the hands of individuals and businesses, with the expectation that this will stimulate economic growth.
But what’s the problem?
The government does not have the revenue to finance these tax cuts.
So, how will it work?
By borrowing money, of course…
In modern economies, governments borrow by issuing bonds. As long as there are buyers for these bonds, borrowing is not an issue. However, these bonds are typically purchased by wealthy individuals and institutions. When the government repays the debt, it does so using tax revenue collected from the public. Essentially, the government’s bond borrowing process results in a wealth transfer from taxpayers to the wealthy. This worsens income inequality.
Currently, the interest alone on America’s national debt exceeds $1 trillion annually. This means that every year, there is a $1 trillion wealth transfer from the poor to the rich. This is not the first time such an event has occurred in U.S. history—similar circumstances arose in the early 1980s, leading to significant income inequality.
The Employment Problem Remains Unsolved!
In the end, lowering the dollar’s value to boost production and employment is not as simple as it sounds. The fact that the U.S. dollar is the world’s reserve currency gives the American economy significant advantages. For instance, the U.S. can simply print money and use it to import goods—effectively acquiring goods for free since other countries continue to demand dollars.
Another issue is that employment levels in U.S. manufacturing will never return to past levels. Just as over 150 years ago, more than half of the population worked in agriculture, yet today only about 2% of Americans work in farming while agricultural output has significantly increased due to technological advancements—the same applies to manufacturing.
Why? Because technological progress and automation have reduced the need for human labor. Trying to boost employment through domestic manufacturing is nothing more than an illusion.
In my humble opinion, these so-called reform efforts are unlikely to yield real results or elevate the country to a better position. There’s a lot of noise, but little substantive progress.
For example, the DOGE agency, led by Musk, has implemented a policy requiring every federal employee to submit a report detailing their work for the past week. These reports will then be used to determine whether employees should be fired!
Is this even a feasible way to lay off workers? The existing laws would not allow such a practice.
Conclusion: Lots of Noise, but No Real Action
Trump’s second presidency will not be like his first. The world has changed, and so must the policies. In reality, the Republican Party has the potential to bring about significant change in America. Compared to the Democrats, the Republicans have a stronger political rhetoric for implementing decisive actions.
However, instead of uniting the country behind a coherent political agenda, they seem more focused on provoking people. It feels as if they are more concerned with how to irritate their opponents rather than making meaningful reforms.
