Donald Trump has a reputation for being a maverick that isn’t always backed up by the facts.
In the past he’s said he’d be willing to raise taxes on the rich, but then he unveiled an unprecedentedly large tax cut that would go mainly to the wealthy. He’s also bucked Republican orthodoxy by promising to protect Social Security and Medicare, but has not offered a detailed plan to pay for it.
The one issue that he has not wavered on—and which has historically been unpopular among Republicans—is his willingness to resort to higher tariffs and taxes to promote American businesses keeping jobs at home. He doubled down on this idea again in an interview with Fortune at the Trump Tower on Tuesday, while actually speaking favorably of Bernie Sanders stance on trade deals. “One thing we have in common is trade. We both know the US is getting ripped off by trade,” he said. “The difference is I can do something about it and he can’t.”
(For more on Trump read, Businesss the Trump Way)
But this compliment isn’t the only way in which Trump is congenial to the Vermont Senator. Much of what he says about trade and his plans to bring back jobs to American sounds very much like Sanders too. When asked how exactly he would bring back jobs that have been lost to places like China and Mexico, Trump told Fortune:
I propose to bring the jobs back by not letting companies leave, and by frankly using the threat of taxation. We’re talking about free markets but the problem is, we’re open, but the rest of the world isn’t open. The only way you’re going to get jobs back into this country is, number one, they cannot devalue their currencies, which they’re killing us with. Number two—and very importantly—we’re going to have to use the threat of taxation in order to keep jobs here and also in order to get jobs back.
We have to be treated fairly by other countries. We are not being treated fairly. We are being run over by other countries, through monetary manipulation, through devaluation of their currencies, and, very importantly, through taxation. Other countries tax us and we don’t tax them.
Trump’s strategy for bringing back jobs comes in three parts. First, he will use the threat of punitive taxation to keep companies from moving overseas. This is slightly different from Sanders’ plan to eliminate the deferral of taxes corporations now can enjoy on profits earned abroad. While Trump wants to use the threat of higher taxes to keep companies from going abroad, Sanders simply wants to tax all corporate profits, no matter where they’re earned. This would create a situation where American corporations are taxed much more on their earnings abroad, because they’d have to pay foreign taxes too. Presumably, this would encourage companies to do more business here at home. But it’s unclear why either candidate thinks that such a strategy wouldn’t simply encourage companies to leave altogether.
But using taxes, or the threat of taxes, to protect domestic industry could come in the form of tariffs too. Like Bernie Sanders, Trump has criticized free trade deals, which among other things, eliminate tariffs and other trade barriers. They both point to the fact that, for instance, the trade deficit with Mexico has increased dramatically since the signing of NAFTA. But it’s unclear how imposing tariffs on trade partners would bring back American jobs. For one, those countries would likely retaliate, the effect being simply a tax increase on everything that both Mexicans and Americans buy, with very little change in where it makes economic sense for jobs to be located.
Mark Zandi of Moody’s Economy.com has taken Trump’s suggestion that we should raise tariffs on Mexico to 45%. Do that, and Zandi’s economic model suggest America will lose as much as 8 million jobs, because of slower trade. In an interview with Fortune, Trump says that number was rediculous. “It’s not going to cost us jobs. It’s going to bring jobs back. China charges us tariffs. We don’t charge. And anything we do is very minor by comparison.,” says Trump.
And finally, both Bernie Sanders and Trump agree that currency manipulation is another way that foreign governments are helping their workers at the expense of Americans. By artificially raising the price of American dollars, for instance, compared to Chinese yuan, the Chinese make it cheaper to sell Chinese products abroad because those products are cheaper. The problem with this analysis, however, is that by suppressing the value of the yuan, the Chinese are actually agreeing to earn less than they deserve for the products they are selling. It may help create more jobs in China, and that may be a problem for America during times of high unemployment. But now that we are seeing the truly intractable problem with the U.S. economy is stagnant wage growth it’s not exactly clear why we would want China or other countries to stop selling us stuff at a discount, as that would only compound the problem of too-small paychecks.