The Short-Term Gains and Long-Term Risks of Trump's Protectionist Policies: An Economic Perspective

It Is Concerning to See that the Short-Term Gains and Long-Term Risks of Trump's Protectionist Policies

Throughout history, great powers have often faced decline after pursuing aggressive external policies to reclaim their former glory, while neglecting the internal structural challenges that sustain long-term stability. In this context, the policies proposed by President Donald Trump have sparked widespread debate. While these measures may offer short-term successes, they risk undermining the long-term economic viability of the United States. This article is not intended to criticize the Trump administration or its policies for the sake of criticism. Rather, it seeks to explore the implications of these policies from an economic and historical perspective, with the aim of considering what is in the best long-term interest of the United States.

The Historical Pattern of Overextension

History offers several examples of nations that declined due to overextending their reach while failing to innovate internally. The Roman Empire, for instance, struggled to maintain its vast territories, leading to administrative and resource challenges that contributed to its fall. Similarly, the British Empire’s overreach in the early 20th century, coupled with its inability to adapt to new geopolitical realities, led to the erosion of its global dominance.

These historical lessons underline the dangers of prioritizing external expansion and protectionist measures over internal resilience and innovation. A similar trajectory could await the United States if current policies fail to address underlying structural issues.

Key Features of Trump’s Economic Agenda

Protectionist Trade Measures

One of Trump’s most controversial policies is the imposition of steep tariffs on imports, including a 25% tariff on goods from Mexico and Canada, and additional tariffs on Chinese products. These measures aim to protect domestic industries and curb illegal immigration and drug inflows. While such tariffs may boost short-term revenues and provide relief to certain industries, they risk disrupting global supply chains, increasing production costs, and raising consumer prices.

Former IMF chief economist Maurice Obstfeld, as reported by MarketWatch, warns that these policies could lead to the formation of hostile trading blocs, thereby undermining the U.S.-led global economic system that has been in place since World War II. In the long term, this could damage the competitiveness of U.S. industries in global markets.

Corporate Tax Reforms

Trump’s tax reforms include reducing the corporate tax rate from 21% to 18% and lowering the capital gains tax rate for high earners to 15%. These measures aim to stimulate business investment and economic growth. However, analysts, including Goldman Sachs’ Jan Hatzius, caution in MarketWatch that such tax cuts could significantly increase the national debt over the next decade, raising concerns about fiscal sustainability. Without corresponding cuts in federal spending, these reforms may exacerbate budget deficits, potentially reaching 6% of GDP instead of the promised 3%.

Energy Policies

Reversing environmental regulations is another cornerstone of Trump’s economic plan. His administration aims to reopen areas like the Arctic National Wildlife Refuge for oil exploration and lift bans on offshore drilling. According to NY Post, these policies are intended to reduce energy prices and revive traditional energy sectors. However, they overlook the global transition toward renewable energy, risking the U.S.’s competitiveness in emerging energy markets.

The Problem of Corporate Governance in Public Policy

Trump’s administration includes a significant number of billionaires and corporate leaders, raising concerns about the influence of corporate interests in policymaking. For example, the proposed Department of Government Efficiency (DOGE), led by Elon Musk and Vivek Ramaswamy, aims to cut $2 trillion from federal spending by streamlining regulations and reducing the federal workforce. While corporate strategies can bring efficiency, applying them to public governance may overlook the broader societal impacts of such cuts, potentially compromising essential government services, as highlighted in Wired.

Long-Term Risks of Neglecting Internal Challenges

Economic Inequality

The emphasis on tax cuts and deregulation may widen the gap between the wealthy and the broader population. Without addressing income inequality and ensuring equitable access to resources, the benefits of short-term economic gains may not reach the majority of Americans, leading to social discontent.

Erosion of Public Trust

The perception that the government prioritizes corporate interests over public welfare can erode trust in institutions. This disenfranchisement could foster political instability and weaken the social fabric of the nation.

Decline in Global Leadership

Protectionist policies and withdrawal from international agreements, such as the Paris climate accord, may diminish the U.S.’s global influence. As other nations invest in innovation and sustainable growth, the U.S. risks falling behind in critical industries, such as renewable energy and advanced technologies.

How to Address These Issues?

The root causes of the United States' various systemic problems extend far beyond illegal immigration, encompassing economic inequality, healthcare system challenges, education disparities, aging infrastructure, and political polarization. Stagnant wages, wealth concentration, and limited access to affordable healthcare exacerbate social and economic disparities. Rising student debt, unequal funding for public schools, and decaying infrastructure hinder economic mobility and growth. Political gridlock, distrust in institutions, and systemic racism perpetuate inequalities, while underinvestment in innovation and renewable energy weakens global competitiveness. Environmental challenges, inadequate social safety nets, and the opioid crisis further strain public health and resources. Additionally, corporate influence and monopolization harm competition and prioritize profits over public welfare. Addressing these issues requires comprehensive policies and systemic reforms that promote equity, innovation, and resilience to ensure long-term stability and prosperity for the nation.

The Long-Term Benefits Should Be Prioritized, Not Just the Short-Term Gains

While Trump’s policies may provide short-term economic and political gains, they fail to address the structural issues that underpin long-term national prosperity. History has shown that great powers decline not merely from external challenges but from a lack of internal innovation and resilience. While I hope for the success of the United States, it is also concerning to see how these short-term-looking policies will "make America great again," as their decline is not attributed to these factors alone. It is not like they have been set back only because of illegal immigrants, for instance. Instead of oversimplifying the root causes and addressing the wrong problems, the Trump administration needs to focus on tackling the systemic issues at the heart of the country’s challenges. This is not only in the best interest of the United States but also critical for the stability and prosperity of the global economy. To ensure sustained growth and global leadership, the United States must balance protectionist measures with strategies that foster innovation, equity, and long-term economic viability. Failing to do so could set the stage for a decline reminiscent of historical empires that prioritized short-term gains over enduring stability.