Right pins hopes on Trump 2.0 unleashing new conservative economic agenda

A leading US think tank says a second Trump presidency could set a new economic legacy, cementing a culture change within the Republican Party and altering the nature of US politics.

Former US President and Republican presidential candidate Donald Trump pumps his fist after speaking at the end of a campaign rally at Atrium Health Amphitheater in Macon, Georgia, on November 3, 2024. (Photo by Elijah Nouvelage / AFP)

A second Donald Trump presidency would complete the revolution in American conservatism and establish an economic legacy that could endure for years to come, cementing a culture change within the Republican Party and altering the nature of US politics.

This is the view of a leading US think tank that pioneered its own “conservative economic” agenda, building on the first Trump presidency, with a second victory for the former president set to elevate and give fresh currency to its reform proposals.

Founded in 2020 by its intellectual father, Oren Cass, American Compass has fostered close ties with a new generation of conservative leaders including Mr Trump’s running mate, JD Vance, as well as Republican senator for Florida Marco Rubio, while former US trade representative Robert Lighthizer serves as an adviser.

While the Heritage Foundation’s 2025 project – a hard-right policy manifesto – has loomed large as a potential policy playbook for a second Trump term, American Compass has spent years promoting an alternative conservative plan aimed at steering the US away from the “neo-liberal consensus” of the previous three decades.

It has championed sweeping trade tariffs, greater industry support and protection of local communities and jobs, with executive director Abigail Ball warning that free market fundamentalism had “dominated the right for a number of decades”.

She told The Australian this had encouraged America to misjudge China’s rise while globalisation had resulted in the “de-industrialisation of the heartland of the United States”.

In turn, this triggered the loss of manufacturing jobs, the destruction of communities and a marked increase in “deaths of despair” with the latter trend in the US drawing recent comparisons by historian Niall Ferguson to the decline of the Soviet Union more than 30 years ago.

While Mr Trump’s win in 2016 amounted to a political earthquake, Ms Ball said that a second term would give the former president a chance to create a new “conservative” economic legacy that could last the test of time.

Some of the ideas promoted by America Compass include eliminating the trade deficit by establishing a uniform global tariff on all imports; the rescinding of normal trade relations with Beijing and imposing even higher tariffs on Chinese goods; rejecting World Trade Organisation rules and standards when they do not meet the US national interest; bolstering industry through tax credits, local contest rules and regulation reform; and reorienting education to elevate non-college pathways for young Americans.

Many of these ideas are already infused into the marrow of the Trumpian movement, with Ms Ball saying a Republican victory this week would mean “a good chance that some of these ideas would be implemented over the next four years”.

Abigail Ball.

“I think the choice of JD Vance as his running mate really suggests that there is a look to the future (for) these ideas because there are a lot of different directions he could have gone,” she said.

“I do think that there’s a lot of potential there for this to really translate into something really, really lasting.”

But a win for Mr Trump would also represent a victory for the champions of the new conservative economic agenda over the previously dominant libertarians in the broader struggle for ideological real estate within the Republican Party.

“I certainly would hope that we win. But I think there are probably a couple points to make on that,” Ms Ball said.

“One is that I think it’s really good for us to be having these debates on the right. My goal is not necessarily to just, sort of, win and never hear from a libertarian ever again. The goal is to actually have it out on some of these issues.

“That being said, I think there are just some basic facts that make it really difficult for the other side of the debate to win.

“The American people are really sick and tired of what they’ve been given by the political class for decades now. They’re starting to realise that what they were sold was a false bill of goods. And this free trade, sort of neo-liberal idea, has just absolutely not delivered for them.”

But the new conservative economic agenda also comes with trade-offs and sacrifices.

Ms Ball said while Americans might have a “cheap TV” there were “very few Americans who, I think, would actually say that they would prefer to have the cheap TV over a strong community and a great job that actually supports their family”.

“The reality is that we’ve really dug ourselves into a hole with the trade deficit, and specifically with our trading relationship with China,” she said. “And so it’s going to require some difficult things to get us out of that hole.

“I don’t think that we should be dishonest with the American people. I think we should be straightforward about the fact that in order to set ourselves on a better path, we do, in fact, need to be willing to sacrifice.”

However, Ms Ball strongly rejected arguments that imposing tariffs on imports would be inflationary, with many economists having warned the combination of Mr Trump’s policies would leave Americans worse off.

In a detailed paper for the Petersen Institute for International Economics published in September, leading Australian economist Warwick McKibbin found that – assuming other governments responded in kind – Mr Trump’s 10 percentage-point tariff increase “results in US real GDP that is 0.9 per cent lower than otherwise by 2024, and US inflation rises 1.3 percentage points above baselines in 2025”.

Written with Megan Hogan and Marcus Noland, the paper also said that if China responded in kind to Mr Trump’s proposed 60 per cent tariffs it would lead to “US real GDP falling more than 0.2 percent below baseline by 2026, and US inflation climbs 0.7 percentage points above baseline in 2025”.

Ms Ball said there was a “little bit of scare mongering” going on about the conservative economic agenda and rejected suggestions that it was anti-globalisation or a return to protectionism. It was about making more in America.

“For the past few decades, our trade deficit shows us that we’ve just been taking stuff in. We’ve just been buying stuff from other countries. We’ve not been making stuff to send out,” she said. “We should be part of that system in the way that a lot of other countries are … by balancing out our trade deficit and making sure that we actually do make things here.”

“We should absolutely be part of a global trading system. It’s just we should be part of it on both sides. We shouldn’t be importing so much more than we export. That’s the real problem.”