Reducing taxes, ending trade deals, squaring up to China and blocking mega-deals: Do Donald Trump’s policies add up?
Casual observers of the US presidential election campaign may be surprised to learn that Donald Trump’s policy plans extend beyond building a wall across the Mexican border and banning Muslim people from entering the US.
In fact, the Republican has set out plans for change across 15 policy areas, including foreign policy, national defence, infrastructure, cybersecurity and regulations.
Here, we look at what we can expect from Trump as president of the United States.
Ending trade deals and squaring up to China
Trump has pledged to withdraw the US from the Trans-Pacific Partnership, which involves 11 other countries, including Australia, Canada and Mexico.
He also set out plans to renegotiate the terms of America’s Nafta pact with Canada and Mexico. If the Nafta partners do not agree to renegotiate, Trump’s government would “submit notice that the US intends to withdraw from the deal”.
In addition, Trump’s campaign set out some tough guidelines for America’s future relationship with China. The President-elect said he would instruct the treasury secretary to “label China a currency manipulator”, tell the US trade representative to “bring trade cases against China” and use “every lawful presidential power to remedy trade disputes if China does not stop its illegal activities”.
The vision Trump set out was designed to “create American jobs, increase American wages, and reduce America’s trade deficit”.
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The verdict?
Research from Moody’s:
Moody’s believes that policies that result in a disruption to the flow of goods and services between the US and its trading partners would be negative for industries including autos, oil, technology. However, it would be positive for industries facing severe import competition, such as steel and manufacturing subsectors.
The special relationship: "You would certainly not be back of the queue"
Current President Barack Obama made clear to Britain that, in the event of a Brexit vote, it would be “back of the queue” for a trade deal with the US.
Trump, though, was supportive of Brexit: “I’ve dealt with the European Union and it’s very bureaucratic. Personally, in terms of Britain, I would say: what do you need it for?” He also made clear that the UK would be quite far forward in the line:
Britain’s been a great ally. They’ve been such a great ally they’ve gone into things they shouldn’t have gone into, for example going into Iraq. With me, they’ll always be treated fantastically. I’m not going to say front of the queue but it wouldn’t make any difference to me whether they were in the EU or not. You would certainly not be at back of the queue, that I can tell you.
The verdict?
Douglas McWilliams, president of the CEBR:
Paradoxically President Trump is at least partly good news for the Brits. It is likely that the other Europeans will feel the need to cozy up to us, which hugely improves the likelihood of successful Brexit negotiations.
Trump will be keen to do a trade deal with the Brits (partly because he knows that this will hit few American jobs). Politically Theresa May is likely to be President Trump’s closest ally and will be seen around the world as the person who can negotiate with him.
Trump is essentially an Anglophile (actually pro Scot but totally anti SNP) who will be able to work with the UK.
Tax changes to make US more competitive
Trump has pledged to reduce taxes across the board, “especially for working and middle-income Americans who will receive a massive tax reduction”. He also wants to “ensure the rich will pay their fair share, but no one will pay so much that it destroys jobs or undermines our ability to compete”.
More significantly for the business world, Trump wants to reduce America’s business tax rate from 35 per cent to 15 per cent, making the country more competitive in order to “keep jobs in America, create new opportunities and revitalise our economy”.
This time last year, Trump was critical of Pzifer’s attempted merger with Allergan, a so-called tax inversion deal under which the US pharma giant could move its headquarters from the US to Ireland.
The verdict?
Investec’s Philip Shaw, Victoria Clarke, Ryan Djajasaputra and Chris Hare:
The President-elect’s proposed economic policy – in short, to ‘create the biggest economic boom’ via reductions in taxes and public expenditure looks (at best) questionable to us. There is of course a considerable degree of electioneering behind the pledge, but at face value, a number of respected US think tanks have suggested that these measures would raise rather than reduce the deficit (as Mr Trump has claimed).
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Blocking other big deals
As well as being opposed to the Pfizer-Allergan merger, which collapsed in April after a crackdown on tax inversions by President Obama, Trump has also said he will block the biggest global deal announced so far in 2016 – AT&T’s $85bn takeover of Time Warner.
When the deal was announced last month, Trump said:
AT&T is buying Time Warner and thus CNN, a deal we will not approve in my administration because it's too much concentration of power in the hands of too few.
The verdict?
This opposition could be a sign of things to come.
A global survey of 1,600 dealmakers published last month found 56 per cent thought President Trump would have a negative impact on M&A.
The economy, jobs and investment
The President-elect has set the goal of creating 25m jobs over the next decade and boost growth to 3.5 per cent per year on average.
Trump has said he intends to pursue an “America’s infrastructure first” policy, refocusing on domestic investment over the “Obama-Clinton globalisation agenda”.
He wants to create thousands of new jobs in construction, steel manufacturing and other sectors. The Republican also wants to make America “energy independent”, aiming to create millions of new jobs in this area.
The verdict?
McWilliams of the CEBR:
US growth is unlikely to stutter in the short term. Probably the decisive result of the election will be associated with a mini spending boom. Janet Yellen will have to be careful about when she raises rates in response to this because it (as in the UK post Brexit boom) may not be long lived and a premature rate rise as the mini boom blows out might trigger an over reaction.
Medium term, cutting off the supply of cheap imports and tightening the labour market will lead to more inflation, though lower energy prices will work in the opposite direction. So by end 2017 it is likely that US rates will be slightly higher than we previously expected – around 1.5 per cent.