The presidency of Donald Trump is poised to usher in a new era for the U.S. economy that forecasters say could boost economic growth, bring higher interest rates and inflation, and a new set of potential risks including international trade wars. The economy could expand 2.2% in 2017 and 2.3% in 2018, as a fiscal stimulus kicks into gear, up from about 1.5% over the past 12 months. Inflation is seen at 2.2% next year and 2.4% in 2018. If correct, it would be the first stretch of sustained inflation above 2% since before the recession of 2007 to 2009.
Trump and GOP congressional leaders share goals of cutting taxes and reducing regulations. Most economists believe tax cuts, especially if not accompanied by spending reductions, would produce a short-term boost to economic growth. His proposals to increase infrastructure spending, if successful, could lead to a large boost in construction employment, with spillover effects for other industries.
Over the past year, forecasters consistently fretted that a severe slowdown in international growth was the biggest risk to the U.S. but in the post-election survey, 65% of economists said the factors likeliest to knock the economy off course were potential White House missteps and a potential trade war topped the list. It was cited as the biggest risk to the economy by 43% of economists. A move from the U.S. to impose tariffs on foreign nations could lead to a spiral of rising trade barriers, higher import prices, and shrinking markets for U.S. exporters.
“Everyone will lose if there is a global trade war,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics.
http://www.wsj.com/articles/gdp-inflation-and-interest-rates-forecast-to-rise-under-trump-presidency-1479054608
A massive increase in fiscal spending to rebuild roads, bridges, and airports, combined with vast deficit-spending in the form of a tax cut, may lead to more money swirling around an already relatively healthy economy. When you are hiring new workers into an already tight labor market, employers have to pay more to attract talent, which will result in higher prices across the board, and increased inflation. If you include Trump’s threat to impose new tariffs on Chinese and Mexican goods, the cost of goods that Americans buy at Wal-Mart and Costco could rise by about 3%, according Moody’s Analytics, who predicts Trump’s proposals could lead to a recession in two years. Before the election, most economists expected two quarter-point hikes in short-term interest rates by the Federal Reserve in 2017.Trump’s election could speed up or slow the pace depending on whether his economic policy prescriptions lead to greater uncertainty in the financial markets.
ReplyDeleteTrump stimulates the domestic economy, but if his rederict is not reigned in a global trade war is possible. As the 45th president will his leadership bring hardship or prosperity?
ReplyDeleteImposing tariffs on foreign goods will cause nothing but anger and uncertainty. Foreigners will began trying to increase taxes of there own, and with us firing back this will cause a global trade war that no one would gain from.
ReplyDeleteI think that Trumps plan will bring prosperity to our country because of the jobs he will create with rebuilding highways and creating construction jobs
ReplyDeleteIt is interesting to see if Trump is actually going to increase thing like the interest rates, because in his campaign he has said more than once that he like interest rates to be as low as possible since he borrows money as the businessman he is. And also I think that the only thing that imposing higher tariffs is going to make is that it is going to slow down the economy and is going to be the opposite that he is trying to do which is to grow the economy.
ReplyDeleteBy imposing higher tariffs on foreign goods, the overall trade balance would not be affected, but interest rates would increase. Higher interest rates lead to lower investment by households. Cutting taxes does increase disposable income, which increases consumption, but can affect national saving and raise interest rates. It is interesting to see whether large investments in infrastructure will impact the economy in the long run.
ReplyDeleteAfter the Economic outlook conference we know that GDP, Inflation rates, and interest rates are suppose to rise. Inflation rates are forecast to increase, but not by a whole a lot they will increase to just above our 2% target rate. I think we need really need to watch what is going to happen to the United States trade agreements in the future, as that is going to be subject in the near future.
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