President Trump's Anti-Growth Agenda Is Harming Families

Forbes

3 days ago

President Trump loves the phrase promises made, promises kept. Without a major course correction, the President will fail to keep one of his most important promises to the American public – restoring economic prosperity.
A post-election analysis from CBS News noted that 'two thirds of voters described the economy as bad, and those voters who did went big for Trump.' Voters trusted Trump over Harris because life had become unaffordable and future economic prospects seemed dim. And consistent with these perceptions, real median household income grew much faster during Trump's first term than during the Biden era.
Unfortunately, voters will be severely disappointed based on the policies President Trump is pursuing. There are many examples. Two of the more disconcerting are his obsession with tariffs and his constant berating of U.S. businesses.
Starting with the latter, Trump's targeting of the pharmaceutical industry that he consistently refers to as 'Big PhRMA' is troubling – not only for its impact on a major economic anchor for the U.S. economy, but also the precedent it sets for other industries.
As I have addressed previously, there are problems with the U.S. drug pricing system that need to be corrected. However, the solution is not threats of price controls. Yet, on July 31st the President 'sent letters to leading pharmaceutical manufacturers outlining the steps they must take to bring down the prices of prescription drugs in the United States to match the lowest price offered in other developed nations.'
Importantly, the President threatened the manufacturers 'that if they 'refuse to step up,' the federal government 'will deploy every tool in our arsenal'' to ensure that the President's will is enforced. These threats are not so veiled references to Trump's Most Favored Nation (MFN) proposal and higher tariffs on imported drugs.
The MFN sets the price for a drug at the lowest price charged in other developed countries (OECD), each of which has price controls on drugs. The logic for implementing the MFN is simple – if patients in the U.K., EU, or Canada are paying less money for a drug then so should patients in the U.S.
The only reason that the prices for innovative drugs in many OECD countries are lower than the U.S. is because they impose strict price controls and shirk their responsibility for covering the cost of innovation. By forcing these prices here, President Trump is threatening to impose price controls on drugs in the U.S.
Making this policy even worse, the Administration consistently complains that 'Europeans are freeloading' and fail to cover their fair share of the costs it takes to create innovative drugs. And he is correct, but the MFN proposal does not end this freeloading. It turns the U.S. into a freeloader.
There will be a high cost to patients should the U.S. become just another freeloader that includes diminished drug availability to current patients and reduced hope for new therapies for patients currently living with untreated diseases. Ironically, the policy could even raise total healthcare spending because the reduced drug availability will increase the need for more higher-cost healthcare services such as hospitalizations, surgeries, and emergency department visits.
Then there is the signaling problem that arises when the leader of the U.S. government is openly threatening U.S. companies. This jawboning undermines one of our core competitive advantages – a pro-growth business environment grounded in the rule of law.
The President's obsession with tariffs – whether on pharmaceuticals, steel, or all imports from a nation – are just as troubling. Tariffs are taxes on U.S. households and businesses. And with the opportunity to stockpile non-tariffed imports over, costs for families are now primed to increase. The tariffs will also raise costs for consumers on domestically produced goods because domestic businesses rely on imports to produce better and more affordable products.
As MSNBC reported, 'Procter & Gamble and Walmart are explicitly raising prices because of tariffs.' Small businesses that have smaller margins and less ability to absorb the higher costs are also raising their prices. Facing increased costs, households will be forced to consume less.
Particularly noteworthy, given the focus on lowering drug costs discussed above, the tariffs will increase the price of lower-cost generic medicines, which account for 90% of all medicines prescribed annually. Therefore, the President's tariff policies are working at cross purposes to his desire to reduce the costs of medicines for patients.
The higher burden from tariffs will not be borne solely by families, domestic manufacturers and retailers of imported goods are also bearing some of these costs. These higher costs reduce the profitability of domestic businesses across a diverse array of industries including automobiles and pharmaceuticals. As the New York Times reported, 'General Motors, Stellantis, Tesla, Mercedes-Benz and Volkswagen have all cited tariffs as one of the main reasons their profits are falling.'
The reduced sales and lower profitability is weakening the economy and diminishing employment opportunities – as demonstrated by the latest jobs report that so flustered President Trump. The lower growth environment will subsequently reduce the amount of investment in the U.S. economy. As a result, households across the country will see their earnings growth stagnate while their expenditures on both imported and domestically produced products will increase.
Whether through trade or regulatory policies, the Trump Administration is pursuing a decidedly anti-growth policy agenda. The results are completely expected – a weaker economy with slower job growth and diminishing opportunities for families across the country. These outcomes break the fundamental promise that candidate Trump made while running for president – to restore prosperity.