Trumponomics: Trump’s Economic Plan Boosts Business Confidence
Washington (Feb 26) While campaigning to become U.S. President, Donald Trump vowed to strengthen the economy by pursuing an America-first agenda. This included a cocktail of policies designed to loosen regulation, cut taxes and boost infrastructure spending while taking a knife to Washington’s existing free trade arrangements.
Since coming to power on Jan. 20, Trump has signed more than a dozen executive orders on issues ranging from free trade to financial regulation. He has also backed off on several others, such as officially declaring China a currency manipulator. For all the backlash Trump has faced in his first five weeks, many in the business community have stood behind his proposed policies.
One of the biggest boosts of confidence in Trumponomics has come from the business sector. Fortune 500 CEOs from companies like Honeywell and Cisco believe the economy is primed for a breakout under the new administration. For Cisco chief executive John Chambers, start-ups have the most to gain under Trumponomics, as looser regulation will enable new companies to go public much faster. Although 90 companies went public on the Nasdaq in 2016, Chambers says we need three to five times that level.
It not just large multinationals that believe Trumponomics will be good for the economy. Small business optimism has surged since the November 8 election, according to the National Federal of Independent Business (NFIB). The industry group’s index of small business confidence spiked to 12-year highs in December. In January, the gauge rose again to its highest level since December 2004.
“The stunning climb in optimism after the election was significantly improved in December and confirmed in January,” NFIB President and CEO Juanita Duggan said in a statement accompanying the January small business optimism index. “Small business owners like what they see so far from Washington.”
Trump’s pro-growth policies have also triggered a massive rally on Wall Street, adding roughly $1.5 trillion in value. The Dow Jones Industrial Average just recorded its eleventh consecutive record close, the longest streak of all-time highs since 1987. The gains have been driven entirely by Trump. Stock market gains accelerated over two weeks ago when Trump told airline executives they should expect “phenomenal” tax reforms in the near future.
Among the president’s most lofty objectives is to consolidate the seven tax brackets and reduce the top rate to 33% from 39.6%. His tax policies also apply to businesses, including a one-off tax holiday allowing U.S. firms to repatriate profits held overseas with only a 10% payment, which is significantly lower than the current rate of 35%. Goldman Sachs predicts that, under the new policy, S&P 500 companies will bring home some $200 billion of the $1 trillion in cash they hold outside the U.S.
Under Trump’s plan, the corporate tax rate will fall to 15% from 35%, instantly making the world’s largest economy one of the more desirable location for multinationals. Analysts say that even a 20% tax rate would put the U.S. among the most competitive in the advanced industrialized world.
One area that Trump has seen bipartisan support is in his handling of the Trans-Pacific Partnership (TPP). With the stroke of a pen, Trump withdrew the U.S. from the 12-nation deal. Trump also signed an executive order calling for the review of the North American Free Trade Agreement (NAFTA), which has governed trade relations between the U.S., Canada and Mexico since 1994.
Despite Trump’s ambitious agenda, the impact of the proposed policies won’t be felt immediately. That’s the message Treasury Secretary Steven Mnuchin delivered to FOX Business last week. In Mnuchin’s view, Washington’s new direction will have a limited impact on the U.S. economy in 2017.
The president is expected to elaborate on his administration’s economic blueprint Tuesday night in an address to a joint session of Congress.
Source: EconomicCalendar
