Presidents Are Not Economic Magicians – The American Spectator | USA News and PoliticsThe American Spectator

Many people (including White House officials) believe that President Trump can simply remake the economy however he wishes. This is incorrect. While a president wields significant power when it comes to some economic policies, he cannot magically make the economy flourish. Nor can he change the laws of economics. A president can, however, create significant distortions and uncertainty. Given that presidents can harm the economy more easily than they can help it, their policies should focus on stability, predictability, and long-term growth fundamentals.

Consider the arguments about egg prices during the 2024 presidential campaign. President Trump and Vice President Vance regularly criticized the Biden administration for inflation, and especially for the price of eggs. Critics of President Trump were quick to point out, less than a month into his administration, that egg prices were still rising. They claimed this meant Trump had failed to fulfill his promise to reduce prices, especially egg prices. (RELATED: The Price of Eggs at CNN)

Egg prices, however, reflect supply and demand dynamics: the number of chickens, their egg-laying capacity, and consumer demand relative to substitutes and their prices. President Trump could not magically increase the chicken population or egg production. Nor could he simply lower the price of eggs by fiat without creating extensive shortages. In fact, egg prices have come down a lot, largely because the chicken population has recovered from the Avian flu outbreak in 2024.

But President Trump can create conditions conducive to reducing prices, such as deregulation, less government spending, and lower taxes. He has promised to continue and extend the tax cuts from his first administration. EPA Secretary Lee Zeldin has begun cutting regulations to increase energy production (natural gas, oil, and coal). Abundant energy will reduce the cost of gasoline, oil, and electricity. Other deregulation reduces bureaucratic red tape, legal costs, and administrative burdens, which accelerates business formation. (RELATED: Tariffs: The Hammer America Keeps Using)

These policies promote economic freedom, which stimulates innovation and risk-taking. Increasing production lowers prices and greater economic activity boosts demand for workers, which increases real wages. Real wages increase when wages rise faster than prices do. Ideally, wages will rise while prices fall, which can only happen with greater productivity and better technology.

Why the President’s Current Tariff Plan Is Bad Policy

Yet tariff uncertainty continues to overshadow the rest of Trump’s economic agenda. The administration cites unfair trade practices by other countries that hinder U.S. exports. Officials frequently discuss using tariffs to reshore and onshore manufacturing jobs. Their rhetoric also focuses on leveling the playing field through reciprocal tariffs and resetting international trade norms. While manufacturing jobs can offer high wages and stability, tariffs only achieve this, if at all, by creating enormous costs. (RELATED: Tariffs, a Solution in Search of a Problem)

Tariffs can be easily manipulated to protect inefficient domestic industries. These industries, lacking infrastructure, skilled labor, or economies of scale, seek protection from more efficient international competitors. Tariffs tend to reward politically connected firms, not innovative and efficient ones.  (RELATED: ‘Defrauding’ the United States)

Market participants also remain concerned about retaliatory tariffs. While significant retaliation has not yet materialized, some countries have begun raising tariffs. Should retaliation increase, and the U.S. respond in kind, the consequences could be severe. Despite U.S. productivity and pro-growth policies, the division of labor that leads to specialization and enhances productivity cannot be maintained without international trade because, as Adam Smith pointed out, the division of labor is limited by the size of the market.

Furthermore, tariffs do not necessarily create more manufacturing jobs on net. Instead, they redistribute jobs from less protected to more protected industries. Remember, President Trump does not have a magic wand that allows him to change how economic dynamics work. Since tariffs are taxes that raise prices and create deadweight loss, they also reduce economic efficiency. We incur an economic cost in terms of reduced overall well-being in exchange for reshuffling, not creating, jobs. Organic growth and decentralized production and innovation are preferable. (RELATED: Taxes by Another Name)

While President Trump’s pro-growth policies can attract investment and encourage economic growth in the long-run, he can’t just reshape the economy by fiat — at least not in a positive direction. A global trade war would shrink markets worldwide, impacting the European, Chinese, and Japanese economies, and ultimately, the U.S. economy. Therefore, avoiding a trade war should be high on the MAGA agenda.

Instead, the administration should prioritize consistent pro-growth policies based on economic freedom over short-term economic fluctuations. Greater consistency on their economic policy, by focusing on generating revenue through low broad tariffs rather than trying to “protect” American industry, will increase the administration’s pro-growth America-first agenda from a B- to an A.

READ MORE from Paul Mueller:

Tariffs, a Solution in Search of a Problem

Drill, Baby, Drill — But What About the Electrical Grid?

A Better Alternative To the Davos Elites