President Trump has enjoyed massive economic growth since his election, much less his actual inauguration. The latest economic growth numbers for Q2 put the annualized rate of growth at a whopping 4.1%.
Naturally, the progressive Leftists are grasping about for any explanation they can to account for this growth, or to downplay it. One of the more novel proposals is that the only reason growth is so high is because farmers are rushing out their exports to other nations ahead of planned tariffs—and the retaliatory measures they will garner.
While I’m willing to concede these premature exports may account for some of the growth rate in Q2, I doubt very seriously that there are enough additional soybean exports to China in a three-month period to bump the entire economic growth rate by more than a fraction of a percent.
Consider all the factors at play here: the 2017 tax cut, specifically to the corporate tax rate, created a yuge incentive to companies to repatriate dollars held overseas, and made American companies internationally competitive again (prior to the cuts, our corporate tax rate of 35% was one of the highest in the developed world). The easing of pressure on corporate rates and individual income tax rates have boosted business and consumer confidence, and wages have increased as unemployment continues to fall.
Even before the passage of the tax cut, deregulation within the executive branch began stimulating the economy. In his famous Gettysburg campaign speech, in which then-candidate Trump put forth his reform agenda for the United States, he promised an executive order requiring the removal of two regulations for every one new regulation written. In classic Trumpian fashion, the President delivered—and then some: in 2017, the Trump administration cut a whopping twenty-two regulations for every one regulation passed.
The one-two punch of deregulation and tax cuts has juiced the engine of the economy with rocket fuel, but the media loves to run with the narrative that it’s all smoke-and-mirrors, and we’re only enjoying this growth because a bunch of farmers rushed out exports early.
They push that story for two reasons:
1.) They can’t give Trump credit for anything positive
2.) It draws attention to the downsides of tariffs, and the cloying sentimentality of the farmer struggling under Trump
I have a great deal of respect for farming and the rural life, but these aren’t Nebraska homesteaders or Jeffersonian yeoman farmers we’re talking about. Not that that matters—big corporate farms shouldn’t be punished for being big; I’m merely cautioning readers to take such rhetoric with a massive dose of soy (actually, pick something else; we don’t need anymore soy boys). The mainstream media is going to spin this story in the most maudlin fashion possible.
Tariffs historically have hurt farmers, who often pay the price of tariffs both ways: they pay more imported goods, and they struggle to access foreign markets competitively when they export their products. And, as I wrote recently, I don’t think tariffs are without their costs.
That said, there’s no way Q2 GDP growth can be driven solely, or even mostly, by farm exports. Further, it seems that such robust growth makes tariffs more affordable, in the sense that the United States can spare a few decimals of growth in exchange for greater protections of worker.
Finally, tariffs-as-bargaining-chip seems to be working. China’s economy is in free-fall, and the Chinese have to eat. Even with tariffs on US soybeans and other farm products, China needs what we’re growing more than we need what they’re churning out.
In short, stay the course, President Trump. Rebalance our trade agreements, make the income tax cuts permanent, and keep regulations light.