Donald Trump’s ongoing criticism of U.S. trade policy may have won him votes during last month’s election, but dropping treaties like the North American Free Trade Agreement may sound better in theory than in practice, two bank economists said Tuesday.
During JAXUSA Partnership’s quarterly luncheon at the Hyatt Regency Jacksonville Riverfront, the two cautioned against President-elect Trump overhauling NAFTA.
“He’s going to have to go light in that area,” said Peter Hooper, chief U.S. economist for Deutsche Bank.
“There’s a lot of misunderstanding,” said Nathaniel Karp, chief U.S. economist for BBVA Compass.
“It’s not the trade deficit that causes the loss of manufacturing jobs,” Karp said, adding changes in technology are more of a factor.
In fact, dropping NAFTA may hurt U.S. businesses if it reduces exports to Canada and Mexico, Hooper said.
“I see this as a bit of a lose-lose situation,” he said.
While withdrawing completely from NAFTA could be “very damaging,” Karp said, a renegotiation “can also open a positive approach” by addressing issues that were not included in the original 1994 agreement, including energy policies.
Another campaign issue the economists hope will temper down is calls for major changes or an abolishment of the Federal Reserve Board. Trump didn’t necessarily call for the central bank to be abolished but was very critical of Fed Chairman Janet Yellen.
Yellen’s term ends in January 2018 and many people think Trump will appoint a new chairman. But Hooper said Trump might change his mind after a full year working with her.
“President Trump will clearly prefer a Fed that is less aggressive in raising rates,” he said. “These two could grow to appreciate each other.”
Karp doesn’t think it’s productive to talk about abolishing the Fed.
“That’s not very positive for growth and stability,” he said. “I think we’re nowhere near that environment.”
Many banking experts expect a Trump administration to be a positive for the financial sector because the president may roll back some banking regulation. But Karp doesn’t expect big changes in banking regulation coming from Congress.
“I think it’s going to be very difficult to get it right this time,” he said.
Instead of new legislation, Hooper said there may be less enforcement of stringent regulations by government officials.
“I think there will be some significant easing up,” he said.
Before the two economists spoke, retiring U.S. Rep. Ander Crenshaw, R-Fla.. talked about the difficult environment in Congress.
Crenshaw, who was honored by JAXUSA for his 16 years representing the Jacksonville community in Congress, said he will miss the people but not the process, which has become “too partisan.”
Or to put it another way, he said, “I won’t miss the circus but I will miss the clowns.”
JAXUSA officials said 2016 was a good year for the community in job growth with 18 project announcements bringing 4,200 jobs.
“One of Jacksonville’s pluses is it’s an attractive place to locate because of costs of labor and production,” Hooper said.
Karp said Jacksonville is an attractive market for its size, but one of its challenges is attracting more STEM jobs (science, technology, engineering and mathematics).
“Obviously, it’s easy to say but it’s much harder to do,” he said.