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Will the Trump economy jump or slump?


written by Steven Franklin

sales-i 29081 2016-11-11 1440960

16 years after the Simpsons satirically predicted it (in what they classed as a ‘vision of America going insane’) and after what felt like 16 years of campaigning, CNN broke the news at 7:36 AM BST on Wednesday 9th November 2016 that Hilary Clinton had conceded the election, meaning Donald Trump became the President-elect of USA and probably the most powerful man in the world.

Since he has become president-elect Trump related searches have seen a significant increase. Search’s include ‘How tall is Donald Trump’ ‘how old is Donald Trump’ ‘Donald Trump hair’ and  ‘Trump net worth’.  All very interesting I’m sure, but we want to focus on one of the real issues. How will the trump economy effect UK and US businesses?

It’s very early days and the finer details have been lacking and were often contradictory during his campaign. However based on his planned policies and his initial speech, below are my views on what Trump’s presidency could mean for the US and UK economy.

Improvements in infrastructure

Two weeks before election day, Trump announced how he planned to bring $1 trillion of infrastructure spending into the US economy, which involved tax credits for construction companies.

He reiterated this during his presidential announcement speech: “We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals… We’re going to rebuild our infrastructure, which will become, by the way, second to none.”

Within hours of his win, shares of construction materials companies climbed to an all-time high. This had a knock on effect for one British company in particular: FTSE 100 equipment hire firm Ashtead Group saw an 11% growth in one day, due to the fact they have a US hire business, Sunbelt Rentals, who it is believed will soon be very busy.

Any infrastructure improvements would undoubtedly have a positive impact on employment, too. Trump believes the work will take 10 years to complete and will ‘’put millions of our people to work’’.

All this is without even mentioning the controversial 2000-mile wall Trump has expressed an interest in building on the US/Mexican border. There are still many questions about this, not least who would actually pay for it and build it. Trump memorably stated that Mexico would pay for the wall ‘’100%.” But Mexican President Peña Nieto met with Mr Trump in September and Nieto tweeting after about the meeting said: “I made it clear that Mexico will not pay for the wall.”

Immigration

The Migration Policy Institute (MPI) released figures in 2015, showing that 42.4 million, 13.3% of the population living in USA were immigrants. This was an increase of 11.3 million on figures since 2000.

Throughout his election campaign, Trump has expressed that he plans a huge crackdown on immigration. In his 10-point plan to make America great again he said he will “Prioritize the jobs, wages and security of the American people”, “select and vet immigrants based on their likelihood of success in the U.S. and their ability to be financially self-sufficient” and “temporarily suspend immigration from regions that export terrorism.”

Trump has also made it clear that up to 6.5 million immigrants already living in the USA could be at risk of a swift deportation.

The benefits of this for the American people would seem to be that it should lead to a reduced threat of terrorism, more jobs for Americans and money made in America staying on American soil rather than potentially being sent back and spent in the migrants’ homeland.

However, a 2013 survey carried out by Business Insider found that jobs worked by immigrants tended to pay low wages and usually require little formal education. The survey showed that many immigrants were ‘housekeepers, janitors and agricultural workers.’

Less immigration would mean a gap in these job areas. Would the out of work American be willing to step up and do these often low paid jobs? Only time will tell.

Tax cuts

Trump has suggested tax cuts for both individuals and businesses. He has said a trump economy will reduce a complicated 7 tier taxation system to 3 tiers of taxation for individuals. He has said this should especially help the working and middle class, giving them more disposable income.

He has said he will reduce business tax from 35% to 15%, which he believes will keep American business competitive with the rest of the world and “keep jobs in America, create new opportunities and revitalize our economy.”

For comparison purposes, the current UK corporation rate is set at 20%.

Trump and the UK

Barack Obama had specifically said a post Brexit Britain would no longer find themselves at the front of the queue when it came to dealing with the USA and Hillary Clinton too had urged Britain to remain in the EU before the Brexit vote.

Trump, however, was pro-Brexit and said Britain would not be “at the back of the queue” for a trade deal with the US should he be elected. He said: “The UK has been such a great ally for so long, they’ll always be at the front of the line, they’ve been amazing allies in good times and in bad times.”

Figures from HMRC show that UK exports to USA total £88 billion for 2014, making them the number one importer of UK goods. So, in theory, Trump’s election win should be a good thing for a post-Brexit Britain when it comes to continued trading with the US.

Some sceptics may also say that an added benefit for the UK may be that suddenly the threat of big companies leaving the UK for USA following Brexit is not so likely with so many uncertainties in a Trump led USA.

Trumps worldwide relations

As soon as news broke that Hillary Clinton conceded defeat, the Russian parliament burst into applause and Vladimir Putin himself was quick to congratulate Trump and state his desire to restore relations with USA.

China and many other counties expressed too that they were looking forward to working with Trump in the coming years. Trump himself said he was looking forward to working with “nations willing to get on with us’’ and has great experience of working with nations in all corners of the world through decades of business dealings.

Statements like these should be taken with a pinch of salt though, as it‘s widely forgotten that both Obama and Clinton expressed similar desires for a healthier relationship with Russia upon taking over at the Oval Office in 2009.

Current trade ties between the USA and Russia are minimal; Exports to Russia have fallen by 33% since 2012 and imports too have fallen by 45% to £16.4 million in 2016.

This contrasts hugely to China, where exports totalled £116 million and imports into USA were at £483 million in 2016.

However, in May, Trump was quoted as saying “We can’t continue to allow China to rape our country. It’s the greatest theft in the history of the world!” Upon being named president-elect, he promised he would instruct the Treasury Secretary to label China as ‘currency manipulators. and instruct the US Trade representative to bring trade cases against China.’

There is already talk that a trump economy may put huge tariffs on items entering the USA, to ‘level up the playing field’ and damage China’s economic growth. However, there is no doubt this could impact on US exports to China too, as no doubt China would apply a similar tariff in retaliation. In effect, a trade war could start between the two countries, which could have negative impacts on US companies such as Boeing, who are supplying the Chinese with airplanes, and companies like Apple, who rely on the Chinese to supply them with rare earth metals for their electronics.

It will be interesting to see if Trump follows through on his views in May and to see if there is a change in the USA’s economic relationship with both superpowers.

Trump has also been highly critical of other worldwide trade links. He has spoken particularly about The Trans-Pacific Partnership, a trade pact involving 12 Pacific Rim nations and the North American Free Trade Agreement, which he feels America get a rough deal from. There‘s no doubt a restructure of these terms will affect the economies of all 12 counties involved, especially Canada and Mexico, who are a part of both.

Conclusion

A lot has changed in the last 4 years and it’s impossible to know for certain what will happen in the next 4 years, but let’s all hope that Trump’s presidency doesn’t end the same way that The Simpsons envisioned it in 2000.

Upon becoming US President, a grown up Lisa Simpson addresses her team: “As you know, we’ve inherited quite a budget crunch from President Trump. How bad is it, Secretary Van Houten?”

To which grown up Milhouse — replies: “We’re broke.”

I hope you found this article an interesting read. I would love to hear your views, leave me a comment below.

Written By -

I am Marketing Executive at sales-i and have been since September 2016. Prior to this I worked in the b2b service industry for 6 years and had roles in Marketing, Sales and Account Management during this time. I Enjoyed it, learnt a lot but missed focusing solely on the marketing side, I missed the feeling of writing a good blog, the excitement of sending out a good emailer and the thrill of opening up google analytics . I'm sad I know.

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