Maganomics 2.0 takes shape with Trump-Vance ticket

The addition of vice presidential candidate Sen. JD Vance (R-Ohio) to the Trump ticket is cementing the Republican Party's turn toward economic protectionism and skepticism toward unrestricted globalization.

Former President Trump's disdain for free-trade agreements and global supply chains shook a policy consensus during his first term, narrowing the gap between the GOP and Democrats on key industrial issues.

Vance, elected to the Senate in 2022, has also shown disdain for some of the long-standing policy priorities of his party and channeled the spirit of economic populism that was a hallmark of the first Trump administration. The Ohio senator has blasted bipartisan agreement on free trade deals and the outsourcing of labor-intensive heavy industries as “the stupid Washington consensus.”

Speaking at the Munich Security Conference in Germany earlier this year, Vance criticized economic policies that have resulted in “deindustrialization” while touting those that promote production.

“Look at the number of people working in manufacturing in Germany now versus 10 years ago,” Vance said to a German audience in February. “Look at the critical raw materials produced in Germany now versus 10 years ago — the energy dependence now versus 10 or 20 years ago. We have got to stop deindustrializing.”

Vance regularly broadcasts his contempt for a bipartisan agenda that shifted the bulk of global production to Asia in recent decades, seeing it as a central factor in the decline of the U.S. industrial base and the social institutions built on top of it in places like his home state of Ohio.

“The crazy thing is — and the free traders never acknowledged this is 2024 — when we were making the argument in the '70s and the '80s that we should build China’s industrial economy, we were doing it explicitly with the knowledge that it would harm America’s middle class,” he said during a speech at the Quincy Institute in May.

Vance has even praised Federal Trade Commission Chair Lina Khan for her antitrust enforcement, saying she’s doing a “pretty good job” even as many in the business world have railed against her. He has acknowledged that his position on Khan sets him apart from the majority of his party.

Vance's mistrust of the globalized value chain echoes Trump’s economic populism while lending it a more measured and less bombastic presentation.

While much of Trump’s economic agenda for a potential second term remains under wraps, some highly protectionist elements seem likely if the former president is able to win the White House once again.

Trump has floated a 10-percent general tariff on imported goods, a 60-percent-or-higher tariff specifically on goods imported from China and a mass deportation of migrants as part of an immigration crackdown.

The economic effects of such headline-grabbing plans, as well as the reception from businesses and the lobbies that represent them in Washington, are likely to be deeply mixed, as the private sector tends to be wary of losing migrant labor and access to international markets as a result of retaliatory moves by other countries. 

Despite resistance, protectionism in the trade agenda was able to gain serious political traction in numerous forms during Trump’s first term, as the former president opened up a trade war with China and renegotiated the seminal NAFTA trade deal to include labor protections in the form of the U.S.-Mexico-Canada Agreement (USMCA).

Trump also pulled out of the massive Trans-Pacific Partnership (TPP) trade deal with several Pacific Rim countries almost as soon as he took office. This all but derailed the multilateral free trade consensus that had been in place since the postwar period and that really accelerated in the 1990s with the passage of NAFTA, the conclusion of the Uruguay round of the General Agreement on Tariffs and Trade, and the establishment of the World Trade Organization (WTO).

While Trump bulldozed a number of international precedents during his overhaul of U.S. trade relations, experts caution that the current regulatory environment, which was recently reset by the Supreme Court in its ruling on Loper Bright Enterprises v. Raimondo, may be less conducive to unilateral changes from the executive.

In its Loper Bright ruling, the Supreme Court threw out what’s known as “Chevron deference,” which extends the power of federal agencies to determine the nature and scope of legislative rules as they see fit.

Law “requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous,” the court ruled.

“This [puts] a check on the executive, as well,” investor and founder of Merk Investments Axel Merk told The Hill. “When you take power away from the administrative state, it of course works for both parties.”

Trump’s protectionism broke from decades of GOP support for free trade and brought the party closer to Democrats, who largely upheld much of the former president's trade agenda during the current administration.

Rather than trying to resuscitate the TPP or strip back the USMCA in the direction of its NAFTA precursor, the Biden administration has allowed these initiatives to stand while further stepping away from the WTO and making room for the greater exercise of national sovereignty in the trade realm.

The Biden administration has not pursued additional large-scale trade deals that make foreign market access a key priority.

In March, U.S. Trade Representative Katherine Tai oversaw a reporting change in the National Trade Estimate report that excluded the designations of trade barriers long preferred by U.S. corporations.

On the domestic level, the Biden administration has also initiated some major new industrial programs across several large pieces of legislation, including the CHIPs and Science Act, which aims to reshore the manufacture of microprocessors, as well as a major infrastructure investment law and a climate technology law.

Despite Trump’s tenor of economic nationalism within the spheres of trade and industrial production that’s now being further amplified by his running mate Vance, many of the most fundamental aspects of their economic policy are very much in line with previous GOP administrations.

These include both business and individual tax cuts that have been central to Republican policymaking for more than a generation and that could further balloon the national deficit.

Trump wants to extend his signature 2017 tax cuts, which reduced several individual rates and dropped the corporate rate to 21 percent from 35 percent. He’s floated further reducing the corporate rate to 15 percent.

Notwithstanding further changes to the corporate rates, the expiring individual and business provisions could add as much as $4.6 trillion to the national deficit, according to the Congressional Budget Office. That’s after it popped to a new plateau of around 120 percent of gross domestic product following the pandemic.

The International Monetary Fund has warned that the U.S. should start a program of deficit reduction within the next 10 years.