Trump - The search for an improbable balance
OMFIF Report - Press Release
20 January 2017
Donald Trump takes over today at the helm of a healthy US economy, benefiting from 75 consecutive months of job gains, annualised GDP growth of 3.5% in the third quarter of 2016, low borrowing costs and bullish financial markets. Yet income inequality has increased, and growth is reliant on accommodative monetary policy and optimistic households ready to spend.
An OMFIF report published today – Trump: Curse or Cure? – outlines the difficult search for a balanced economic policy that could mitigate the threat of additional Federal Reserve interest rate hikes derailing the recovery.
The 45th US president proposes to put ‘America First’ by introducing punitive import tariffs, reneging on international agreements, and threatening to brand major trade partners as currency manipulators. Domestically, Trump has pledged to lower both corporate and income taxes while increasing spending, especially on infrastructure, and deregulating financial services.
This report explores whether such initiatives will be a curse or cure for the US and world economy. While some commentators have described Trump’s policies as ‘the height of irresponsibility’, the strength of the American economy and Republican majority in Congress will give the new president significant flexibility.
Trump enters office with historically low approval ratings and a cabinet heavily criticised for its connection to the banking sector. Ultimately, the strength of global financial markets will be the barometer of Trump’s success – and whether his economic policy manages to achieve an improbable balance.
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