A bi-weekly publication from Consultiva Internacional, Inc. (Registered Investment Adviser)
Now that we know the election results, what economic policies can we expect from the incoming administration? President-elect Donald Trump was quite clear during the campaign about the economic issues he wants to address during his administration, but he seemed, as a colleague put it, deliberately “opaque” about how he would go about doing things. Most likely we will have to wait for his cabinet and economic counsel to give us the specifics, but here’s what we know: Trump wants to put forward a “pro-growth” tax cut, which his supporters say will be as big as Ronald Reagan’s 1981 reform. Trump wants to simplify the tax code and reduce marginal rates that would encourage investment and economic expansion. His proposed corporate tax rate of 15 percent seeks to make it easier for domestic firms to repatriate earnings, and also make the U.S. more attractive to foreign investors. Small business would also pay 15 percent tax on income.
Another “pro-growth” measure is the adoption of an energy policy that furthers the exploitation of fossil fuel resources in the U.S. to build additional reserves that would presumably give the country greater leverage in energy markets. This would be accompanied by reversing executive action that seeks to promote clean energy production, such as the Clean Power Plan adopted in 2015 by the Environmental Protection Agency.
Finally, it will be very interesting to see just how Trump’s economic team deals with trade. During the campaign the President-elect said China is stealing and cheating the U.S. in its trade agreements and that jobs needed to be recovered from Mexico and other jurisdictions. However, in many instances it has been the U.S. based multinational themselves who have sourced from China to assemble or distribute finished products at home, and they have also moved part of their production process to countries that are less regulated and offer cheaper labor, in pursuit of increased profits along the value chain. Negotiating better trade deals could help the U.S. economy, but taking a “tougher” stance might not necessarily increase support for the Republican Party’s historic open markets discourse.
by Myrna Rivera, CIMA®
Founder & Chief Executive Officer
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