A sitting American president just argued, in public, that a trade deficit is the same thing as a loss, demanded the Federal Reserve cut interest rates to 1%, and predicted GDP growth of 20%. University of Michigan economist Justin Wolfers responded by calling it "the dumbest thing ever said by a president." There were no serious counterarguments.
The Truth Social Economics Lecture Nobody Asked For
Trump has been on a tear lately, and as The Guardian reports, his recent statements on trade and monetary policy have crossed from the usual bluster into something economists are describing with clinical alarm. On Truth Social, he wrote that he would "stop trading with countries" with which the US has a trade deficit if the Federal Reserve doesn't cut interest rates. He then followed that up with the assertion that if the US stopped trading with every country it runs a deficit with, it would pocket $1.5 trillion a year.
This is not how any of this works. Not even a little. What Trump is describing is not a revenue stream. It is a trade embargo against most of the industrialized world, including China, Mexico, Taiwan, and the European Union, which together supply the United States with computer chips, rare earths, auto parts, lumber, fertilizer, aluminum, and roughly half the inputs that keep American manufacturing alive. But sure. Big number on Truth Social. Very impressive.
The 'Deficit Equals Loss' Theory Will Not Be Peer Reviewed
The Guardian's Steven Greenhouse offers a useful illustration of exactly how wrong Trump's trade logic is. Imagine the only trade between the US and France is wine and bourbon. France sells the US $2 billion in wine. The US sells France $1 billion in bourbon. Under Trump's framing, the resulting $1 billion trade deficit means America just handed France $1 billion for nothing. A pure loss. A rip-off.
Except Americans got $2 billion worth of wine. They wanted the wine. They paid for the wine. They are, presumably, enjoying the wine. That is called commerce, and it has been the operating principle of human civilization for roughly five thousand years. The president of the United States does not appear to know this.
Trump's own Truth Social post made the stakes explicit: "The word 'Deficit' is nothing more than a fancy word for LOSS." That sentence is wrong in a way that is actually hard to achieve. It takes a specific kind of committed ignorance to be that confident and that incorrect at the same time.
He Also Wants 1% Interest Rates While Inflation Is Still Running Hot
Two days before the Federal Reserve raised its short-term rate to 3.75%-4% to fight inflation, Trump was publicly demanding rates of 1% or 0.5%. "We should be at 1% or half a percent," he said. The Fed, apparently unswayed by this analysis, raised rates anyway.
Wolfers, the University of Michigan economist, did not equivocate. He called Trump's 1% demand "the dumbest thing ever said by a president." That is a competitive field. Wolfers won the argument.
For anyone who skipped Econ 101, here is the short version: slashing interest rates to near-zero supercharges borrowing and spending, which pumps more money into an economy that is already producing too much inflation. Trump has also repeatedly promised to bring prices down. You cannot cut rates to 1% and bring prices down simultaneously. These are mutually exclusive outcomes. The man promised both.
20% GDP Growth Is a Number He Said Out Loud
If the Fed did what Trump wanted and cut rates to the bone, he predicted, the US could achieve GDP growth of "14, 15, 16 and 20." Percent. Annual GDP growth. For the United States economy.
According to The Guardian, the US economy grew at 2.2% in the second quarter of this year. It rarely exceeds 5%. The only time US GDP growth hit 20% or higher in the post-World War II era was in the third quarter of 2020, a statistical anomaly caused by businesses frantically reopening after a once-in-a-century pandemic had shut everything down the quarter before. It was, in other words, a bounce. A mathematical correction. Not a policy achievement.
Twenty percent sustained GDP growth would make the United States the fastest-growing economy in human history, by a wide margin, for years on end. China at its absolute peak in the early 2000s hit 14%. Trump is describing something that has never happened anywhere. He said it on Truth Social.
Seven Percent of Americans Trust Trump on AI. He Thinks That's Fine.
The same week Trump was posting about his superior economic intelligence, a Wall Street Journal poll found that just 7% of Americans think he should take the lead on regulating AI. Seven percent. That is not a mandate. That is a rounding error.
Trump's response to the general question of guardrails on artificial intelligence was, and this is a real quote: "The only control or 'guardrails' that AI needs is a STRONG AND SMART (High IQ!) PRESIDENT, and the U.S.A. has that, in spades!" He is referring to himself.
Republicans Against Trump responded to his recent economic statements by calling him, simply, "Dumbest. President. Ever." That group exists. Republicans formed it. They said that.
The Dingo Take
Every Econ 101 student who got a C-minus on their first midterm and felt like an idiot about it: you know more about international trade than the President of the United States. You have always known more. You probably knew more at eighteen, half-asleep in a lecture hall, than the man currently wielding tariff authority over the entire global economy. Sit with that for a moment.
The really dangerous part of all this is not the ignorance itself. Powerful people have been ignorant before. The danger is that Trump is not surrounded by people who stop him. As The Guardian notes, his economic advisers are watching him post 20% GDP predictions and deficit-equals-loss manifestos on Truth Social and apparently deciding that is fine. Either they agree with him, which is terrifying, or they have given up trying to explain things to him, which is worse.
He has actual power to do these things. He has already proven it with the Canada trade war, a completely self-inflicted wound that hurt American businesses and consumers to own nobody in particular. A president who genuinely believes stopping trade with the European Union would make the US $1.5 trillion richer is not a harmless crank. He is a crank with tariff authority, a Federal Reserve he is actively trying to bully, and Truth Social. That combination should scare you considerably more than it seems to be scaring anyone in a position to do something about it.
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