On Monday, the Trump administration unveiled its 2020 budget proposal. As Philip Klein pointed out, it relies on imaginary savings and unrealistic expectations of economic growth. But why does the Trump administration think the economic outlook is so much better than others, including the Congressional Budget Office, have estimated? Part of that rosy outlook for growth likely has to do with yet-to-be-made trade deals.
Indeed, Trump has repeatedly talked up his belief that trade deals, such as the always just-around-the-corner agreement with China, would boost the market and do wonders for growth:
Important meetings and calls on China Trade Deal, and more, today with my staff. Big progress being made on soooo many different fronts! Our Country has such fantastic potential for future growth and greatness on an even higher level!
— Donald J. Trump (@realDonaldTrump) February 17, 2019
Trump’s not wrong that such a deal would bring economic benefits. It would certainly stabilize the market, boost businesses hit hard by existing tariffs and the uncertainty of a trade war stalemate in addition to opening up new markets for U.S. goods. And even if the best case scenarios for such a deal wouldn’t yield quite as much growth as the Trump budget depends on, it would go a long way toward bridging that gap.
The problem, however, is that Trump doesn’t have a trade deal with China. And for all of the hopeful rhetoric coming out of his administration, one doesn’t seem likely anytime soon.
Indeed, an in-person meeting between President Trump and Chinese President Xi Jinping to finalize the details of an agreement was initially hoped to take place in March. Now, that seems unlikely. Xi is reportedly in no hurry to make a deal, and as Politico points out, his travel schedule means he’s unlikely to make it to the U.S. before the end of the month. That makes sense — Xi is unlikely to meet with Trump without a solid deal and despite round after round of talks — few specifics have been agreed to, and the broad principles where there is common ground lack details or enforcement provisions.
Of course, a major deal meeting all of the goals outlined by the Trump administration was unrealistic. It called for a restructuring of China’s economic model, which seems quite unlikely. And, as a rule, governments tend not to drop economic policies that underpin their political legitimacy.
In short, the kind of comprehensive trade deal Trump’s team seems to be betting on isn’t going to happen. And a budget that depends on promised growth from such a deal is doubly fictitious.
