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The enormous US presidential elections ended on 9th November 2016 which marked the victory of Donald Trump as the next US President. He won 276 seats against his opponent Hillary Clinton and delivered a victory speech in New York City to a cheering crowd of supporters. The result shocked many followed by protests while some celebrated his success. Barack Obama also congratulated his successor, and for the need of unity amongst Americans, he said, "Everybody is sad when their side loses an election. But the day after, we have to remember that we're actually all on one team."   

During Trump’s presidential campaign he gave insight on various policies if elected on the field of immigration, economy, foreign policies, etc. His immigration policy centered to stop immigrants from illegally entering the country and prison those who succeed in doing so. His primary concern of this policy is that the Americans would get a greater say when it comes to job opportunities.

The foreign policy is based on making America safe from any terrorist groups. He intends to entirely eradicate Islamic terrorism from the country and cancel any deals or negotiations that are sponsors of terrorism or are even slightly involved in it. These policies might act as a silver lining in the dark cloud but will his economic policies do the same?

 

The Economic Policy

To fathom broadly, Trump's plans to reform the tax structure and trade policies and to make it easier for investment, production and promote manufacturing in America. Through the policies, he wants to create more job opportunities for Americans and serve as the best place to conduct business as he also plans to renegotiate NAFTA.

TRADE

     NAFTA (North American Free Trade Agreement)

The agreement is signed by Canada, Mexico, and the United States in January 1994 and aimed to eliminate barriers to trade and investment amongst the three countries. After the implementation of the agreement it brought about significant change in Canada’s economy, the GDP level increased while furniture industry also grew substantially. Mexico’s economy witnessed a landmark through Maquiladoras; these are plants that have moved from the United States to this region and produce final goods for exports, back in the states. Hence, US face loss of jobs as income sector increases in these plants boosting the country's economy.

Trump desires to end such groups not realizing it might lead to loss of Mexico’s economy as it contributes to 65% of their exports resulting in unemployment in the country. Thus, he needs to have a better outlook towards the policy that would work in betterment for both the nations. He also plans to withdraw from the agreement if either of the countries disagrees to renegotiate.

 

He assumes that the free trade policies like NAFTA, Trans-Pacific Partnership (TPP) are responsible for collapsing American manufacture industry. Due to which Americans are not getting enough employment opportunities, or they have depressing wages. His anger towards China was evident when he termed the country as ‘currency manipulator' and held it responsible for the collapse of more than 50,000 factories since China joined the World Trade Organization. As a result, he intends to increase the tariffs up to 45% on Chinese import goods. China being the second-largest economy might be affected but not as much as the newly elected president hopes to as the country has the largest manufacturing market which exports their produced good to various countries markets and the profits earned would overshadow the loss they would suffer from American markets if any.

TAX STRUCTURE

Donald Trump was criticized for not paying income tax for two decades and ironically plans to deduct the tax rates for all income groups. He has vowed elimination of income tax for individuals earning less than $25,000 annually or $50,000 for a married couple and also said: "ensure the rich pay their fair share."

The reduction in taxes will help boost the economy but will also cost the government money thereby increasing the government debt hence making it burdensome. Also, the tax structure by Trump would help wealthy Americans to save millions as he doesn't ensure an appropriate policy so as to keep in check how the rich pay their fair share.

Trump intends to lower the corporate taxes and restrict companies from moving money out of the country. The money that stays in the economy might be used for reinvestment or distribute it to shareholders which would encourage US corporations. But on the contrary, if the policy gets enacted, will other countries invest in US markets for better returns?

INTEREST RATES

The interest rates are set up by the Federal Reserve, the US Central Bank. However, Trump plans to undermine its independence and has accused Federal Reserve of creating a ‘false economy.' After Trump’s victory, the stock markets crashed majorly leaving the brokers stunned due to which the central bank’s move to increase interest rates shifted further.

Also, more tax cuts from the government would loosen the fiscal policy, and the Federal Reserve would be compelled to hike up the tax rates.

 

Donald Trump's economic policy centers in America, and the concept of globalization has gone to a toss. His policy of letting the wealth inside the economy only will hinder economic growth due to deficit and employer’s ability to create new jobs. As without any further growth, other countries will stop investing in the US economy and the monetary policy will get tightened resulting in high-interest rates making matters only worse.

The only clear stance of his economic policy is setting up of new manufacturing industries that can actually bring about employment opportunities. However, if the country withdraws or negotiates from the trade policies, it will crush the US economy. Hence, Donald Trump should have an overlook of his economic policies as one doesn't know the uncertainties of the economy that lies ahead.

Perhaps we hope that Donald Trump’s ‘Let’s Make America Great Again' doesn't become a false story for people across the world.

 

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Written By Gunjan Sharma

Currently studying economics majors in KC College. Aspiring to specialize in field of finance.

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