The law of unintended consequences is a well-understood phenomenon: Public officials impose a law or rule intended to prompt one type of behavior, but fail to consider everybody who might be affected or ways people might react. In this manner, seemingly rational policies often backfire by creating an incentive to do the opposite of what policymakers intend.
President Trump is remarkably cavalier about consequences—and that could become the fatal flaw of his presidency. The latest example comes from Trump’s escalating trade disputes, which are rife with unintended consequences. When Trump put Chinese telecom firm Huawei on a blacklist in May, banning it from doing business with U.S. firms, he probably didn’t intend to harm American companies. But that’s exactly what’s happening.
Delivery giant FedEx has sued the government—the U.S. government, not the Chinese one—saying the Huawei policy shift imposes a burden no shipper can comply with. Under the new policy, FedEx (FDX) isn’t allowed to transport Huawei products—but it doesn’t know what’s inside every one of the 15 million packages it ships every day. It only knows the originating and shipping addresses. So FedEx could end up breaking the law if it doesn’t open every package to see what’s inside—which it plainly can’t do—and inadvertently ships a Huawei product. A Trump policy meant to shackle a foreign company has imposed an absurd burden on a domestic one.
[Check out our super-short guide to the 24 Democrats running for president.]
The Huawei ban is hurting other American companies that supply software or components to Huawei, including Google, Intel, Qualcomm and Micron, and are losing business. Banning Huawei from buying American components also creates an incentive for Huawei and other Chinese tech firms to begin a moonshot program to develop their own componentry, so they’re never again dependent on American suppliers. Trump’s policies could make Chinese tech firms more fearsome in the future, not less.
Trump didn’t campaign for president by promising to put American farmers out of business, yet his tariffs are pounding farmers, too. The Trump tariffs on Chinese imports triggered highly predictable retaliatory tariffs from China on U.S. exports, especially agriculture. U.S. soybean exports have tanked and farm income is down. Trump didn’t intend for these consequences to occur, but an army of economists and trade experts predicted they would. He didn’t care.
Other troubling consequences of Trump action:
Soaring budget deficits. Trump and many other Republicans predicted the 2017 tax cuts would produce so much economic growth that tax revenue from new workers and businesses would pour in and the tax cuts would pay for themselves. As most economists predicted, that hasn’t happened. Instead, the tax cuts have sent federal deficits soaring toward $1 trillion per year, levels only reached during the deep recession of 2007-2009.
Loss of faith in the Federal Reserve. Trump has been bashing the Fed for not cutting interest rates, even though that would be an unusual and possibly irresponsible thing to do during an expansion with a historically low unemployment rate. Yet the Fed may now have to cut rates, as Trump wishes, if Trump’s own protectionist trade policy damages the economy enough. Investors trust the Fed more than any political institution, and if they start to believe the Fed is politicized, there could be nothing that anchors faith in the U.S. economy in a downturn.
Faster global warming. Trump isn’t just inert on climate change; he’s abetting it, by promoting policies that lead to more fossil fuel use, not less. Global warming is a huge problem beyond the ability of one world leader to fix, but Trump’s indifference to a plight his own grandchildren will contend with may reveal better than anything else his neglect of consequences likely to arise once his time in Washington is over.
A showdown with Iran. Trump must have thought the Iranians would play along when he withdrew from the 2015 deal that forced Iran to suspend its nuclear weapons program in exchange for the right to sell oil. The Iranians have lashed out instead, an outcome many experts predicted. Instead of improving upon an imperfect deal, as he promised, Trump has lit a match in the always volatile Middle East.
Recurring theme: Experts predicted many if not all of the unintended consequences Trump has brought to pass. Trump ignored those experts, probably because he doesn’t fear the consequences or he thinks they won’t affect him.
Trump famously postulated that he could shoot somebody on Fifth Avenue in New York City and his supporters wouldn’t care. But they would care if he shot them, and that’s what Trump is risking with radical policies that could slow the economy, hurt workers and generate new hostility toward Americans around the world.
Trump’s trade wars may be one escalatory step away from causing economic damage that becomes measurable today. If there’s a recession, exploding deficits will make it harder for Washington to enact traditional stimulus spending. The United States will prevail if there’s a Middle East war, but it won’t be bloodless. Trump may feel he’s not bound by consequences, but it’s voters who will decide that, not him.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman