As much as the Presidential campaign divided voters, the election of Mr Trump as the 45th President of the United States is polarising opinions about his future policies. This commentator, a non–American, like many outside of the US probably, would just like to know how much of what he has said will be seen through.
Let’s start with things we believe he is most likely to push ahead with. He is committed to spending money; we just do not know how much money. He has consistently said he will spend a $1 trillion as a fiscal boost to the economy to improve infrastructure and create jobs. Mr Trump has the support of the American Society of Civil Engineers, which has given the US infrastructure a D+ grade and warned that the country needs to spend $3.3 trillion between 2016 and 2025.
Mr Trump has said he wants to create growth and jobs. However, the US economy is already at close to full employment, and there are some nascent signs of a pick-up in inflation. If Mr Trump pushed to accelerate real growth to 3.5 to four per cent we could find the Federal Reserve rushing to choke off his growth with higher interest rates for fear of elevated inflation.
Mr Trump says he wants to cut corporate and personal taxes. To date there has been only limited detail on what magnitude of tax cuts Mr Trump has in mind and from the proposals made thus far they would tend to favour mainly the rich rather than the middle incomes that supported him in the election. Mr Trump’s brand of tax changes may struggle to find support even from the majority of members of the Republican Party.
Mr Trump’s ‘beginning of the end’ moment comes from his foreign policy. The world outside of the United States is very concerned with his policy cocktail of Mexican Walls, ripped up NAFTA agreement, diluted NATO commitment, détente with Russian President Putin and punitive taxes on some Chinese goods entering the United States. Already emerging markets asset markets such as the Mexican peso have sold off heavily.
What we can probably conclude is that this could be the beginning of the end for the political elite who promised much but delivered only a decades of economic ‘progress’ that was inevitably going to lead to a financial crisis. But this probably not the end of the beginning of a new brand of political leadership that has won through in Brexit and now in Trump’s win in the US Presidential election. The new political leadership seeks a more nationalistic self-interested approach, a slower pace of globalisation, and a rate of economic development that keeps every all of the society engaged. If this is not achieved, it could really be a more biblical beginning of the end.