US President Donald Trump has been using a transactional approach to economic management, extracting concessions from trading partners in exchange for access to the world’s largest consumer market. Recently, he targeted American companies, including chipmakers Nvidia Corp. and Advanced Micro Devices Inc., by agreeing with them to pay 15% of their profits earned from selling certain semiconductors in China in return for export licenses.
Economists warn that this approach is a recipe for slower economic growth, less innovation, and lower living standards over time. Ryan Bourne, an economist at the Cato Institute, describes Trump’s model as “maximalist corporatism,” which favors a pay-to-play economy where foreign countries and domestic companies pay tribute to the White House for special privileges.
The concern is that this approach could distort business decisions and undercut smaller companies. Economists also worry about Trump’s attempts to exert more control over institutions, such as the Federal Reserve and the Bureau of Labor Statistics, which help create the conditions for private markets to operate.
Despite Trump’s actions, economists say that the US is not abandoning market capitalism for state-centric planning. However, his approach does seem to favor a pay-to-play economy where business decisions are increasingly influenced by political considerations.
The bigger concern is not about ideology but about the impact on the country’s economic data and the ability of companies to make good rational decisions. The Bureau of Labor Statistics has already been starved of funding for years, and this trend could accelerate under Trump’s leadership.
Michael Strain, director of economic policy studies at the American Enterprise Institute, suggests that Trump’s approach is not an ideological agenda but rather a desire to shake down powerful companies. However, even among Republicans, opinions on Trump’s economic policies are divided, with many keeping their heads down and avoiding criticism.
Source: https://www.theglobeandmail.com/business/article-donald-trump-economy-pay-to-play-private-sector