Trumpnomics 2.0, Rolling on Three Wheels

Trumpnomics 2.0, Rolling on Three Wheels

Editor’s Note: The World Kangdukwon Federation does not endorse one political view or another. Great Grand Master Hwa Chong, however, as a trained economist, urges students to use Kangdukwon principles to apply taekwondo understanding to the global economic sphere.

The captain of the US economy, which accounts for a quarter of the world’s GDP, is changing. On the 20th, US President-elect Donald Trump will re-enter the White House and begin his second term. The core of Trumpnomics 2.0 (Trump’s economic policy) that will begin in three days is the high ‘tariff’ on foreign products. During the presidential election, Trump said, “The most beautiful word in the dictionary is tariff,” making all trading partners tremble in fear. After being elected, he also said that he would impose a 25% tariff on Mexico and Canada, which are bound by the free trade agreement called the United States-Mexico-Canada Agreement (USMCA).

Major overseas media outlets analyze that the key to stopping Trump’s ‘runaway’ lies unexpectedly within his economic team. The weekly magazine The Economist said, “Trump’s inner circle is divided into three groups: ‘mainstream conservatives,’ ‘America First,’ and ‘tech giants. Just like the first Trump administration (2017-2021), mainstream conservatives who have taken up key positions are people who will moderate trends such as extreme protectionism.” The economic philosophies of the three groups – mainstream conservatives, America First, also known as diehard MAGA (Make America Greater) – and tech giants who first moved from western California to eastern Washington, DC, overlap in some ways and conflict in others. For example, mainstream conservatives who support free trade along the orthodox Republican Party’s lines are concerned about the high tariffs pushed by the MAGA faction. Tech figures are clashing with the MAGA faction over the issue of accepting more highly skilled immigrants. The question is whether these differences within the new economic team will degenerate into division and recrimination, or lead to healthy tension and checks and balances.

  • What each of the three ‘wheels’ that make up Trump’s economic team is aiming for and what the results of the tug-of-war between them will be.
Three Axes That Drive Trumpnomics

Trump has excluded mainstream US bureaucrats and politicians, but he has filled his economic team with ‘mainstream conservatives’ from the financier and entrepreneurial background. A representative example is Scott Besent, CEO of Key Square Group, nominated as Treasury Secretary. Besent is a financier who worked as the chief investment officer (CIO) at legendary investor George Soros’s Soros Fund and then founded his own hedge fund. Howard Rutnick, nominated as Secretary of Commerce, is also a financial giant who leads the investment bank Cantor Fitzgerald. Former North Dakota Governor Doug Burgum, who will serve as Secretary of the Interior and Chairman of the National Energy Council, and Chris Wright, CEO of Liberty Energy, nominated as Secretary of Energy, will lead the change in energy policy.

The philosophy of mainstream conservatives is connected to former President Ronald Reagan, who dreamed of an extreme free market economy. They seek to reduce both taxes and government spending, and to eliminate regulations in large numbers to pursue the continuous growth of the US economy. This trend is also reflected in the ‘3-3-3’ policy that Bessent proposed to Trump. It means reducing the fiscal deficit to 3% of GDP, producing an additional 3 million barrels of oil per day in the US, and continuing the 3% growth through deregulation, etc.

Another axis, the MAGA faction, mainly stays by Trump’s side in the White House. They include White House Deputy Chief of Staff Stephen Miller, White House Senior Advisor for Trade and Manufacturing Peter Navarro, and White House Office of Management and Budget Director Russell Vought. Jamison Greer, who will lead the Office of the United States Trade Representative (USTR), is also a representative MAGA believer. Under the philosophy of “America First,” they are trying to protect American manufacturing by raising tariff barriers and minimize the influx of immigrants while protecting American jobs. Their priority is also to block the rise of China, which seeks American hegemony in all areas of the economy and security.

The group of “tech giants,” including Tesla CEO Elon Musk, who is called Trump’s “first buddy,” wants the United States to maintain its status as a technological hegemon, including artificial intelligence (AI), based on deregulation and the influx of Excellent foreign talent. This group includes Vivek Ramaswamy, founder of Roivant Sciences, who was selected as co-head of the Office of Government Effectiveness with Musk, and Sriram Krishnan, a former Andreessen Horowitz partner who was selected as the White House’s senior AI policy advisor. David Sacks, who was appointed as the cryptocurrency and AI “czar,” is from PayPal, an online payment company, and served as the chief operating officer (COO).

◇The first front is ‘tariffs’ that will stimulate prices

The three major groups of Trump’s economic team actually have very different economic philosophies, so there will inevitably be winners and losers depending on the issue. The first battleground where the three teams of ‘Trumpnomics’ will clash is tariff policy. The mainstream conservatives and the MAGA faction have completely opposite ideas. The MAGA faction wants to block the inflow of imported goods by building high tariff barriers in order to revive the American manufacturing industry and create jobs. Treasury Secretary Bessent, who will run the US government’s household, believes that high tariff policies are a bad move that will only raise the price of imported goods and revive inflation. This is common sense logic that is accepted in mainstream American economics. CNN reported that “Bessent has told people around him that he ‘completely disagrees’ with universal tariffs (imposing a 10-20% tariff on all trading partners). Rutnick, who will be the Commerce Secretary, says he supports raising tariffs, but in reality, he sees tariffs as a kind of bargaining chip.”

In fact, there are warnings from many places that the ’60-25-20′ tariffs proposed by Trump could significantly increase prices and reduce growth rates. Experts predict that if, in addition to the 60% tariff on China, a 25% tariff on key trading partners Canada and Mexico and a 20% universal tariff are actually implemented, the US economy could also take a big hit. Global asset management firm Lazard said, “Even if we assume that a 60% tariff on China and a 10% universal tariff are imposed, the US inflation rate will rise by more than 1 percentage point,” and “On the other hand, the US economic growth rate could fall by more than 1 percentage point due to the impact of the tariffs.”

Trump repeatedly emphasized during his presidential campaign that he would suppress China and solidify America’s global hegemony. MAGA cheers this anti-China sentiment, but the tech community is different. As businessmen, they often find it difficult to give up sales in China or cooperation with Chinese companies. Musk is a representative example. From January to September last year, more than 20% of Tesla’s sales, $14.893 billion, came from China. Tesla’s largest electric car factory, Gigafactory, is also located in Shanghai, China. Major media outlets such as Reuters and The Guardian reported that “Rutnick’s Cantor Fitzgerald has been helping Chinese companies go public in the United States. His other company, BGC, is operating a joint venture with a Chinese financial company whose largest shareholder is a Chinese state-owned enterprise.” This is why tech figures are likely to apply the brakes whenever MAGA pushes China out.

◇Tech industry worried that MAGA faction will block overseas talent

There are already fierce battle lines on the issue of immigration. Tech people believe that the ‘professional work visa (H-1B)’ issued to highly skilled immigrants is helpful for the development of science and technology in the United States, while the MAGA faction believes that the influx of immigrants should be reduced. The tech community has been demanding that the quota (annual number of visas issued) for highly skilled immigrants be lifted, citing the difficulty of finding capable engineers and others in the United States. Many people in the tech community, such as Musk and Krishnan, are immigrants themselves.

On the other hand, the MAGA faction believes that even the highly skilled IT professionals who come to work in the US are taking away American jobs. Steve Bannon, a former White House chief strategist close to Trump, recently said in an interview with an Italian media outlet that he would “get Musk out before the inauguration.” This is a vicious remark that clearly reveals the intentions of MAGA within the government, and it was made in response to Musk’s emphasis last month on the need to expand H-1B visas, saying that “there is a shortage of technical talent in the US .”

Trump seems to be supporting Musk. In an interview with the New York Post on the 28th of last month, Trump said, “I’ve always liked this visa (H-1B) and believed that this visa is necessary,” and “I think it’s a great system (that “helps the US economy.” However, some are also predicting that the “civil war” within the Trump camp over the immigration issue will not end easily.

◇Musk bows his head on energy policy

Trump is certain to put the brakes on the transition to green energy. Mainstream conservatives believe that fossil fuel production should be increased to slow inflation. The Republican Party has also traditionally been friendly to the energy industry. The MAGA faction is also determined to significantly revise, if not repeal, the Inflation Reduction Act (IRA), a signature policy of President Joe Biden.

On the other hand, Musk, who produces electric cars, a representative eco-friendly item, through Tesla, had a different stance on fossil fuel production from the beginning, to the point that he calls himself an “environmentalist.” Musk said to have thought that an active response to the climate change crisis was necessary since his college days. However, Musk, who became a key member of Trump’s economic team, seems to be taking a step back on energy policy. At an event held by Italy’s ruling party, the Brothers of Italy (FdI), last month, Musk said, “In the short term, warnings about climate change are exaggerated,” and “In the medium term, oil and gas companies should not be demonized.”

Source: Weekly Biz of 19 January 2025


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