Trump’s own plans stand in the way of repeating his economic success

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Subscribe to enjoy similar stories. Sometimes the order in which you do things makes all the difference. That could prove to be the case with President-elect Donald Trump’s economic policies.

In his first term, sweeping tax cuts preceded the imposition of selective tariffs. That meant the economy already had solid momentum when the negative impact from trade disruptions hit. This time around, the order is likely to be reversed.

The tariffs could also be much wider while the amount of new tax relief is smaller. That seems like a recipe for an economic downturn. “Trump’s economic agenda is initially (mostly) negative for the economy, while ‘growth positive’ factors are back-end loaded to the end of 2025 and beyond," Longview Economics wrote in a note.

The note added that tariffs will effectively act as a tax hike on consumers, similar to high oil prices. A review of Trump’s last administration is instructive. After nearly a year of congressional wrangling, the Tax Cuts and Jobs Act was passed in late 2017 and took effect at the start of 2018.

It lowered individual income-tax rates, including the top marginal rate, from 39.6% to 37%. But its biggest impact was on businesses, reducing the corporate income-tax rate to 21% from 35%. The law was an economic success.

Real gross domestic product growth accelerated to 3% in 2018 from 2.5% the prior year, marking the best year for growth since before the financial crisis. The economy added 263,000 manufacturing jobs that year, the most since 1997. But Trump’s trade battles soon threw sand into the gears.

They began narrowly, with tariffs on solar panels and washing machines imposed in January 2018. Steel and aluminum tariffs followed in March of 2018. Though limited in scope, these