How ‘Maganomics’ would flip the US economy on its head

Good morning and welcome to US Election Countdown! Today let’s dive into:

• Trump’s economic agenda

• The fight for election integrity in Georgia

• How markets behave in close elections

If Donald Trump wins the election and implements his “Maganomics” agenda, it would fundamentally reshape the US economy — not to mention the country’s relationship with the rest of the world [free to read].

Its main pillars include aggressive tariffs on imports from China but also on those from US allies, an immigration crackdown, and Trump’s rhetoric points to greater political influence over the Federal Reserve and the dollar.

As the former president hammers the Biden-Harris administration over the high cost of living, he has proposed tax cuts as part of the solution. With reduced taxes for individuals and corporations featuring new policies on overtime pay, tips and pension benefits, his populist economic agenda paints him as a defender of the interests of regular working people and domestic manufacturing.

It’s hard to differentiate between Trump’s actual plans versus bluster and negotiating tactics but economists of all stripes broadly agree that his new brand of Maganomics is a much more radical extension of the policies he put in place as the 45th president.

A second Trump term would usher in an era in which import levies would be at their highest since the 1930s. While Trump says his plans would both raise revenues and lead to the restoration of domestic manufacturing, critics argue that the tariffs wouldn’t be enough to cover the cost of tax cuts and would worsen inflation.

Even some of Trump’s allies have warned that some of Trump’s proposed policies would be damaging to the economy and wouldn’t help the US take on China, either.

“All of this stuff of sanctions and threats of tariffs and all that stuff is not the right way to go. That’s a way of guaranteeing World War Three,” said Arthur Laffer, an economist close to the former president.

The Peterson Institute for International Economics, a think-tank, projected that widespread tariffs combined with a 60 per cent levy on China would leave the average household to spend $2,600 more a year on goods, something that would disproportionately hit people on low incomes.

Campaign clips: the latest election headlines

• US sellers of election merchandise are facing a flood of cheap Chinese goods, despite both campaigns’ efforts to promote products made domestically. [Free to read]

• Trump’s plan to gut the Inflation Reduction Act would be a “foolish” act of self-harm and give China the advantage in a global cleantech race, the US energy secretary has warned. 

• The man suspected of plotting to shoot Trump last month stated in a note that it “was an assassination attempt”, according to US prosecutors. The Secret Service has said it faces a heightened threat after the attempts on Trump’s life.

• New polling has found signs of strength for Trump in the Sun Belt swing states of Arizona, Georgia and North Carolina. (NYT)

• Most European leaders are anxious about a second Trump term, but Italian Prime Minister Giorgia Meloni is bolstering her ties within his orbit, including with Elon Musk. 

• Do celebrity endorsements actually matter in the US election?

Behind the scenes

Last Friday, Maga-friendly officials on Georgia’s election board ruled that ballots in the state must be hand-counted. It’s a move that campaigners warned could delay the election result for weeks.

Changes like this — and others that allow officials to halt the certification of election results to conduct a “reasonable inquiry”, without defining what reasonable might look like — pave the way for legal chaos, and potential violence after the election, critics say.

Battling the board on the ground is Georgia’s Republican secretary of state, Brad Raffensperger, who received the infamous call from Trump urging him to “find” the 11,780 votes the ex-president needed to win the state. Raffensperger refused. Death threats followed. He’s now back in the crosshairs of Trump’s allies.

“There are a lot of bad actors out there,” Raffensperger said to the FT’s Joe Miller. “That’s why we need people that are going to stand their ground no matter what.”

Such “bad actors” threaten to undermine the vote in Georgia, where the race is extremely tight. Raffensperger has been touring the state to reassure voters that their ballots will be safe and educate the public on new security measures.

Meanwhile, some county-level officials “are trying to lay the groundwork to dispute the election results in Georgia if former president Trump loses”, said Nikhel Sus, deputy chief counsel at the advocacy group Citizens for Responsibility and Ethics in Washington.

Trump seems to be thinking about such an outcome. At an Atlanta rally last month, he said: “We have to make sure that we stop [Democrats] from cheating,” and called his allies on the state board “pit bulls fighting for honesty, transparency, and victory”.

Datapoints

Investors tend to get jumpy ahead of close elections. Interestingly, how close and contentious a US presidential race is has a greater bearing on markets than the party of the victor.

Since 1928, stocks in the benchmark S&P 500 have tended to fall in the lead-up to a close election, then surge in the final week of campaigning before continuing an upswing — with more volatility — after election day, according to analysis from Research Affiliates.

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“We believe this is due to fear of the outcome increasing — on both sides of the aisle — ahead of the election and then dissipating, on one side of the aisle,” the authors wrote.

Both value and growth stocks perform similarly in the run-up to polling day, but afterwards, value stocks tend to rebound when Republicans win, while growth stocks usually do so when Democrats take the White House.

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Viewpoints

• Global business columnist Rana Foroohar explores whether Harris should admit her party’s mistakes and apologise for them in order to win swing state votes like those in Pennsylvania. [Available for Premium subscribers]

• Biden’s prevarications over the Middle East and Ukraine threaten his legacy and Harris’s election prospects, writes US national editor Edward Luce.  

• The Wall Street Journal editorial board slammed Trump’s pledge to cap credit card interest rates at 10 per cent, likening the proposal to a pitch from “America’s two leading socialists”, senator Bernie Sanders and representative Alexandria Ocasio-Cortez. (WSJ)

• Andrew Marantz spends time on the ground in Michigan to see whether voters who won’t back Harris because of her stance on the Israel-Hamas war will throw the election to Trump. (The New Yorker)