Did Protectionism Win In 2016, or Was It Donald Trump's Personality?

A protectionist has never before been elected, or been re-elected President of the United States.  William Jennings Bryan ran three times while promising to de-link the dollar from gold based on the fanciful belief that doing so would boost exports.  His stance was a protectionist one, and he lost three times.

Herbert Hoover was voted into the White House on the strength of the Harding/Coolidge/Mellon economy.  It was a year into his presidency that he signed the Smoot-Hawley tariff bill; one that raised record levels of taxes on foreign goods.  The taxes rendered it difficult for foreign producers to sell in the U.S., and by extension difficult for U.S. producers to sell goods outside the U.S. The vibrancy of the economy plummeted thanks to a stroke of President Hoover’s pen that mindlessly erected barriers to the very division of labor that frees us to the do the work that most amplifies our talents.  Hoover lost to Franklin Delano Roosevelt in 1932, and FDR among other things wisely ran on shrinking the burden of Hoover’s biggest error. 

Fast forward to the 1980s and 1990s, and protectionists were still being rejected by the U.S. electorate.  Missouri congressman Dick Gephardt ran in 1988 for the Democratic presidential nomination, and made his campaign all about taxing Japanese imports.  Despite early success in the primaries, he was eventually taken out by the unmemorable Michael Dukakis. Pat Buchanan tried to oust George H.W. Bush in 1992, only to fizzle out.  Ross Perot ran third party that year with explicit protectionist leanings, and while some will say he deprived Bush of a second term, his hostility to foreign trade in no way resonated with the electorate. Figure that the hyperpolitical President Bill Clinton (who beat Bush and Perot in ’92) succeeded in getting NAFTA passed in 1993 while telling voters that “NAFTA means jobs.”

Americans have not only voted against protectionism at the ballot box, they’ve also voted against it with their feet and credit cards.  We know this given the immense popularity of Wal-Mart as a retail destination, but we also know this from the love Americans have for all things Amazon.  Wal-Marts are stocked with goods from the around the world, and Amazon’s site features goods from around the world.  After all that, the most valuable company in the world is Apple, Apple is venerated in the U.S., and it is despite the fact that its products are manufactured overseas. 

Which brings us to Donald Trump.  He undeniably ran on a protectionist platform.  He talked tariffs on countries like China that allegedly “take advantage of us,” talked naively about the good of a weak dollar, plus promised to build a “big, beautiful wall.”  Trump won. Has the always open U.S. (the average tariff on foreign goods is 1.4%) gone protectionist in very short order?

The optimistic and hopeful answer from here is no.  Figure that Trump ran against the anti-charismatic Hillary Clinton.  It’s not a knock on her to say she isn’t a politician.  Most aren’t.  Her husband was.  She wasn’t.  That she thought herself good at politicking was the height of self-unawareness, and was plainly exposed as wrongheaded through her near loss to an unhinged socialist in the form of Bernie Sanders.  She also lost to Trump, though it’s fair to wonder if her near-certain victory depressed turnout for her.  It’s only a guess.  Even if true, this race shouldn’t have been close.  Trump won because Clinton narrowly beat Sanders.

But was the U.S. electorate expressing protectionist tendencies? That’s hard to countenance.  For one, Clinton similarly ran on a protectionist platform.  For two, consider the lack of success among Republicans attached to Trump (Roy Moore most notably) since his shocking win.  The track record isn’t good.  All this despite a seemingly healthy economy.  Apparently Trump doesn’t have any coattails to speak of.  Americans once again don’t elect anti-trade declinists.  Instead, they elected Donald Trump.  There’s a difference.

If anyone doubts the above, let’s imagine if Trump had run on a free market platform.  What if he’d loudly mocked all the wasteful spending by Congress that by definition exists as a barrier to the creativity of truly talented CEOs and entrepreneurs? What if Trump had described government spending as waste by the seriously inept?  

And while Trump’s been good on the deregulation front, what if he had made the incompetence of regulators a major campaign theme? As in what if this most profane of billionaires had told voters that “Those who can, do, and those who can’t, regulate!” What if, eager to bolster his blunt point, Trump told GOP voters that regulators are the kind of people who can’t get jobs in the private sector, and most certainly the kind of people he would never hire.

On the subject of the dollar, what if Trump had loudly criticized the incompetence of George W. Bush and Barack Obama? What if he’d regularly made a point to tell voters about how a dollar that purchased 1/260th of an ounce of gold when Bush got into office, that bought 1/10000th of an ounce when Obama entered in the White House, but that was now buying 1/1200th of an ounce.  What if Trump had made it a regular part of his stump speech that this horrid devaluation of the dollar had amounted to the federal government stealing from every single American; theft that was more pronounced thanks to the rising food and energy costs that always correlate with devaluation?

As for trade, what if Trump had properly championed global trade as a way to mitigate Treasury’s relentless clipping of the dollar? What if Trump had told voters that open trade was the only way to shrink the power of Washington thanks to companies with fewer ties to Washington competing to serve our needs over those that do?

And on income tax rates, what if Trump had still mocked “Little Marco,” “Low-Energy Jeb” and “’Lyin Ted” for their rhetoric about tax cuts that had never been backed up? What if, during the initial 17-person debates, Trump had made plain his outsider status by pointing to all the Republican politicians who, despite GOP control of Congress throughout much of the 21st century, had failed to bring penalties levied on the productive down?

About all of the above, we’ll never know.  But it’s not a reach to say that the voters elected a personality over a political theorist, and through Trump expressed their disdain for Washington in general.  They wanted economic growth too, but neither Clinton nor most on the GOP side were talking wisely about the economy.  Trump wasn't either, but imagine if he had been.  Maybe his upset wouldn’t have been so shocking, and maybe investors wouldn’t be so worried today.