60 seconds on Trump's potential economic impact
In this video, Keith Wade discusses some of the potential economic implications of Donald Trump's presidential election victory.
9 November 2016
Now that Donald Trump has been elected we need to think about how it will affect the US and world economy.
He has some strong policies on trade, fiscal policy and migration.
On the trade side there is a concern that he will want to put tariffs on the likes of China and Mexico, and he has talked about tearing up the North Atlantic Free Trade Agreement (NAFTA). This would slow down global trade growth and by putting tariffs on goods it would likely push up US inflation, and it could lead to a retaliation from other countries who might in turn put tariffs on US goods. This is what we call a trade war and would not be good for global growth.
However, fiscal stimulus from Trump could offset this. We could see some extra spending and he has talked about huge tax cuts. I don’t think he will get all that through Congress but we will see some of that.
He is now also talking about rebuilding the US and we could see some infrastructure spending. Before the election he talked also about some big cuts in expenditure so it is difficult to work out where that will go, but I think there will be some fiscal stimulus coming through.
Then on migration – he is going to cut migration, he’s going to be increasing deportations. That would actually result in probably higher wage growth, which is something he wants to achieve but again that could be inflationary because the US is at the end of its economic cycle and unemployment is already quite low. When you start cutting the labour force in this environment you probably get more inflation.
Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.