Donald John Trump, an American businessman, reality television personality, real-estate mogul, and now the President-elect of the United States, has declared to Make America Great Again. He has proposed policies to achieve this goal, with some potentially having a massive global impact. Below are some of the policies which he has brought forth during his election campaign.
Over the years, America’s infrastructure has been crumbling and improvements are needed. Investing in infrastructure will strengthen America’s economic platform by making it more competitive, create millions of jobs, increase wages, and reduce the costs of goods and services. However, a hefty amount is required to finance an infrastructure project.
To improve the current ailing infrastructure, Trump has proposed to bring private investors directly into projects, via public-private partnerships. A large tax credit will be granted for private investors in such projects — equal to 82 percent of the equity amount in any deal. The hope is that this tax break will lower the cost of financing and spur more investors to pour more money into these projects. This could boost the construction and commodities industries as more of these projects are carried out.
However, high user fees or tolls are needed to help private investors recoup their investments and the government also has to fund lots of infrastructure that are unprofitable. Hence, no amount of tax breaks would get private investors to spend money on infrastructure that does not pay. In other words, the positive impact on construction and commodities industries may be limited.
To revitalize the American economy by creating an environment that keeps jobs in America and encourage the growth of both large and small businesses, Trump has proposed to cut tax rates on both individual income and business income. Trump's tax plan does two things for individual income tax. It reduces the rates for the highest earners, going down from 39.6 percent to 33 percent, and it tightens the tax brackets so that there are only three brackets instead of seven.
For business taxes, the rate will be lowered to 15 percent from 35 percent. However, the plan on the reduction of business tax rate is ambiguous and no specific details could be found. A simple interpretation could be that business income will be taxed at a maximum rate of 15 percent. This will spur more domestic and foreign investments into the country and bolster America’s economic growth.
Furthermore, he is getting rid of all taxes associated with Obamacare and also eliminating the federal estate tax entirely. Only the wealthiest taxpayers — less than 1 percent — now pay the federal estate tax. Ending it would lead to a great concentration of wealth in America.
Economists disagree on whether the tax plan would be good for the economy. The Tax Policy Center said that over the first decade of implementation, the government would lose $6.2 trillion in revenue, producing huge budget deficits that could hurt the economy.
Trump has suggested putting a 45% tariff on Chinese imports, declaring China a currency manipulator, proposed taxing imports from Mexico, withdraw from the Trans-Pacific Partnership (TPP), and renegotiate with the North American Free Trade Agreement (NAFTA) the terms of that agreement to get a better deal for American workers.
Assuming that it all comes to fruition, America faces retaliatory measures from other countries, potentially leading to a trade and currency war. Imports into the country will get more expensive as companies could hike prices in order to protect corporate profits and margins. Based on Trump’s theory, companies could avoid such tariffs by producing more in America instead. The problem here is, however, that labor is more expensive in America, so even if companies bring production back to America, the increased labor costs could push up prices too. With the hike in production costs, global trade will be affected and the increased costs will eventually be passed on to the consumers.
National Defence, Foreign Policy and Defeating ISIS
Radical Islamic terrorism has been a growing threat and Trump has declared that he will aggressively pursue joint and coalition military operations to crush terrorist groups in the Middle East region. This bodes well for the military and defence industries as Trump seeks to boost U.S. defences by increasing more personnel and weapons and focusing on cyberwarfare.
Trump’s vision of making America become totally independent of any need to import energy suggests that more funding will be used on developing energy production and related technologies. The oil and gas industries will stand to benefit as he attempts to achieve this vision.
He has blamed the decline of the coal industry on Obama’s clean-energy policies and promised to revive the coal industry, and rescind job-destroying environmental regulations. However, the decline in usage of coal is due to cheaper alternatives such as natural gas and renewable power, and also flat electricity demand. With these barriers in place, the coal industry seems unlikely to be resuscitated and renewable energy is here to stay.
Construction and commodities industries may not benefit much from Trump’s infrastructure policy as financing still remains an issue. The proposed tax plan to boost America’s economic growth at the expense of a loss of $6.2 trillion in tax revenue does not seem justifiable and details of the tax plan are still ambiguous at the moment. Trump’s strategy of “Americanism, not globalism” threatens the free trade environment as he seeks to renegotiate or pull out from free trade agreements which may lead to the start of a trade or currency war. Making America energy independent will increase America’s shale energy production and add on to the current oil and gas surplus, thus putting more pressure on the prices of oil and gas. The renewable energy industry will also stand to benefit as Trump seeks to achieve energy independence. The industries to benefit most from Trump’s administration are the military and defence industries as he is determined to bolster America’s defence capabilities and eradicating terrorism.
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