Originally published by The Washington Post
American businesses are freaking out, and for good reason. The administration’s populist, anti-growth policies are a threat to the economy.
The Federal Reserve’s so-called Beige Book, released on Wednesday, found that “Outlooks remained positive, but contacts in various sectors including manufacturing, agriculture, and transportation expressed concern about the newly imposed and/or proposed tariffs.” The Federal Reserve Bank of Dallas was only one of the regional banks to echo that concern. “Outlooks, while still optimistic, have become more uncertain due to new tariffs and trade concerns.” In the manufacturing sector specifically the Dallas Fed warned, “Expectations regarding future business conditions remained optimistic, although several contacts noted that the newly enacted tariffs were creating a lot of uncertainty in their outlooks for activity and prices.”
In fact, in an otherwise positive economic environment, President Trump’s trade policy seems to be the biggest concern. Marketwatch explains:
Contacts in nine of the dozen Fed regional banks expressed concerns about trade tariffs — with 36 mentions of the word in the report. Business owners were upset with the price rises for metals in the wake of the Trump administration’s decision to place penalties on steel and aluminum imports. And there were worries about the prospect of future tariffs on Chinese imports from various sectors such as toys, agriculture, and transportation. There were relatively few comments about the tax cuts signed into law by President Trump. . . .
“These (aluminum) tariffs are now killing high-paying American manufacturing jobs and businesses,” said one contact in the Boston Fed’s district, upset that the price of “thin gauge foil” had been raised three-fold.
Major economic players are beginning to speak out. Citigroup’s chief economist, Willem Buiter ranted on CNBC: “It would be the biggest self-inflicted wound since the great financial crisis. . . . It would be the end of the global recovery.” In case that wasn’t clear he added, “It would be very disruptive, both for importers and exporters. And it would be a major cyclical downturn, depending on how intense and how long-lasting this episode would be.”
Meanwhile, concern about immigration is rising among the Big Donor community that has been, until now, faithful to the Republican Party. The Koch Brothers-backed Libre Initiative and the Freedom Partners Chamber of Commerce launched, according to a news release “a national broadcast, cable and targeted digital ad campaign calling on bipartisan congressional leaders to take action on a permanent solution that would provide certainty for Dreamers, who were brought to the United States as children and face an uncertain future.” The groups’ release called this part of a “seven-figure campaign that includes Capitol Hill advocacy and grassroots mobilization.” Here’s the ad:
In short, the anti-market, anti-growth policies of the Trump administration not only have begun to overshadow the tax cuts; they have now, during a midterm election year, put them at odds with a cross-section of their supporters and donors.
Worried CEOs and Koch-funded organizations should start playing hardball. In a year in which it seems the GOP’s majority in the House is already gone, they should stop funding a protectionist/anti-immigrant Republican Party. In some cases, the Democrats are just as bad on the trade issue, but disgruntled donors can simply decide to sit out the midterms. Moreover, they can make clear that, come 2020, they won’t be supporting candidates for any office that adopt immigration and trade policies at odds with a pro-growth agenda.
Ads are nice and TV appearances are swell. But if these voices really want to get the GOP’s attention, they should shut their wallets. That’ll get Republicans to perk up. And it should alert Democrats that there is a rare opportunity to match good policy with good politics — if they can get off their own protectionist kick.