In this analysis, we explore the perplexing and often contradictory economic strategies of the Trump administration. Satyajit Das presents a compelling examination of these unpredictable approaches, which frequently seem more like half-formed ideas than coherent policies. The administration’s actions hint at a nostalgic yearning for a bygone era—one reminiscent of the 1890s.
By Satyajit Das, a former banker and author of various technical works on derivatives as well as several general titles: Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives (2006 and 2010), Extreme Money: The Masters of the Universe and the Cult of Risk (2011), and A Banquet of Consequences (2016 and 2021). His forthcoming book, The Everything Bubble: A Guide to the New Age of Financial Speculation and Phantom Wealth, is set for release in 2027. He has also authored works on ecotourism, including In Search of the Pangolin (2006, with Jade Novakovic) and Wild Quests: Journeys into Ecotourism and the Future for Animals (2024). This piece expands upon an article published in the print edition of the New Indian Express.
Supporters of the U.S. administration argue that it aims to disrupt existing geopolitical and economic norms for the greater good. However, the events of the last 17 months suggest that a return to traditional methods might be much more beneficial. To borrow from Shakespeare’s Polonius, if the administration’s actions reflect a method, then there is certainly madness at play.
While aiming for lower inflation, the administration’s wars, tariffs, and sanctions are inadvertently increasing costs and putting pressure on prices. Although it desires lower energy prices, the initiation of hostilities in the Gulf, which negatively impacted oil and gas supply, starkly contradicted that goal. While conflicts may benefit U.S. energy exporters, they overlook the fact that America still imports certain oil products. Consequently, American prices have risen at a sharper rate compared to other nations, which can better manage these hikes through measures like cutting fuel taxes.
The Trump administration is optimistic about increasing U.S. oil production by up to 3 million barrels per day. However, shale oil producers, the primary source of new supply, have hesitated, as they seek more certainty regarding future prices and need prices between $60 and $80 a barrel to drill profitably. Despite Trump’s ambitions to lower prices and bolster his approval ratings ahead of the mid-term elections, producers are choosing to use their windfall profits to pay down debts or reward shareholders rather than investing in increased production.
Furthermore, the U.S. is engaged in a trade war with Mexico and Canada, its largest sources of crude imports. This strategy ignores the fact that U.S. refineries are optimized to process these specific grades of oil, leading to potential logistical nightmares if alternative suppliers must be identified or operations retooled at great expense. The administration is also tightening sanctions on Russia, further pressuring oil prices.
Trump expects members of the Gulf Cooperation Council to invest in the U.S. to fund his Peace Board. Yet, ongoing conflict and declining oil prices, should they persist, are adversely impacting their economies and limiting available surpluses for investment. He has requested Saudi Arabia invest up to $1 trillion in the U.S., despite Riyadh needing an oil price of $80 to $90 just to stabilize its budget and support mega projects designed to diversify its economy away from fossil fuels.
The ‘build-in-America’ initiative aims to replace cheaper foreign goods with more expensive domestic production across various sectors. However, given the historical evolution of supply chains, this cannot be implemented overnight. The U.S. has undergone de-industrialization, resulting in a shortage of skilled workers. The effort to onshore chip production in Arizona has encountered substantial delays, cost overruns, and exposed cultural and regulatory differences, ultimately relying on Taiwanese workers to fill gaps. Moreover, the plant will not produce cutting-edge chips or utilize the latest technology available. Increased tariffs redirect resources towards low-end essential goods that could be sourced more cheaply from abroad, thereby constraining the capacity for more advanced manufacturing and resulting in higher prices and disrupted supply chains.
The administration’s fiscal and monetary policies are equally revealing. The proposed tax cuts lack substance, serving as a mere continuation of existing provisions and will likely be offset by tariff-related costs. To echo Alice in Wonderland’s Humpty Dumpty’s, “when I use a word … it means just what I choose it to mean,” a White House spokesperson recently claimed that tariffs represent “a tax cut for the American people”—a notion previously unknown to economic theory.
Even if enforced, the proposed tariffs are unlikely to remedy America’s chronic and escalating budget deficit. The income from tariffs cannot substitute the $2 trillion generated from individual and corporate taxes. Given the wide range of imports valued at $3.4 trillion, it would necessitate dramatically punitive tariff rates, which would curb imports by making them prohibitively expensive, thus limiting revenue generation. During the first Trump administration, 92 percent of the revenue from these tariffs ended up subsidizing dissatisfied farmers.
Additionally, the intended extensions of tax cuts, along with the elimination of taxes on social security, tips, and overtime, as well as the reinstatement of state and local tax deductions, could reduce annual revenues by approximately $900 billion. Over the next decade, projections indicate that the deficit will rise from $2 trillion to $3.6 trillion, primarily due to escalating expenditures on social security, healthcare, and aging demographics. This trend will lead to increased public debt and interest obligations, which currently constitute 4.7% of GDP—the highest rate in the G20 and the second-largest expense after Social Security, surpassing defense spending.
The administration simultaneously desires to devalue the dollar, maintain its strength, and uphold its status as a reserve currency, claiming it contributes to overvaluation. It does not recognize that tariffs are, in fact, driving the dollar’s strength by encouraging onshoring and lowering trade deficits. A weaker dollar would elevate price pressures, whereas a stronger dollar during Trump’s first term counterbalanced the tariff-induced price increases.
A depreciating dollar would deter foreign investment—something the U.S. desperately needs. One measure being considered to weaken the dollar involves converting U.S. Treasuries into zero-coupon century bonds or perpetual securities. If enacted unilaterally, this would essentially amount to a default. If taken seriously, to safeguard their investments, institutions may start selling off their substantial holdings of U.S. Treasuries, prompting a significant rise in interest rates.
The goal of lowering interest rates is fundamentally incompatible with the inflationary pressures from tariffs, loose fiscal policy, a weak dollar, and a lack of incentives for foreign investors.
Efforts to roll back immigration, including the questionable deportation of green card holders, are restricting the inflow of skilled labor and affordable workers. This not only reduces tax revenues but also exacerbates workforce shortages and wage pressures. Immigration has helped mitigate the challenges posed by an aging population; once, five workers financially supported each retiree, but this ratio now stands at three and is projected to decline to two.
Cuts in education and research undermine workforce skills and productivity. The treatment of foreigners at borders deters tourism, an industry that plays a critical role in the economy, accounting for around 11 percent of jobs and contributing $2.36 trillion in 2024. The long-term benefits of tourism post-World Cup are uncertain.
The administration’s extensive use of executive power, aggressive interpretations of laws, lack of respect for the legal system, and disregard for judicial oversight could potentially lead to a constitutional crisis. The erosion of legal rights and a tendency to renegotiate agreements will likely instill caution among foreign investors considering partnerships with the U.S.
The MAGA agenda risks transforming into MEEGA (Make Everyone Else Great Again). Actions taken by the U.S. paradoxically promote self-sufficiency in other nations, effectively isolating America. European countries’ efforts to bolster defense capabilities and exclude U.S. suppliers threaten American arms export revenues. Over time, these foreign competitors are likely to enhance their capabilities and capture a greater market share. The modest savings from eliminating foreign aid and cultural programs will pale in comparison to the larger losses in international influence.
Using a football analogy, the administration’s policies could be likened to own goals. Mark Twain once pondered whether the world is governed by wise individuals playing tricks on us or by fools genuinely mismanaging it. This question applies aptly to the present state of affairs under the Trump administration.
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