USA: What the new Trump presidency brings to the economy and the labor market –

And while the whole planet is wondering if the voters in the USA have the brakes to re-elect Donald Trump president and even stronger than in his first term, few are focusing on exactly what he campaigned for to get this the result.

The recipe that Trump prepared and presented to all social classes and subcategories of American society, has as its core the economy and especially the liberal model, but with doses of protectionism and extreme capitalist competition. The x-ray of the policy that Trump is expected to follow in the next four years is of course now of interest not only to his voters and US citizens, but also to governments around the world, since there is sure to be an economic impact, especially in Europe.

Tax cuts

Trump personally loves cutting taxes, so he made cuts for businesses and individuals a priority for his second term. Although the plans he has listed are not specific and costed, he has promised a tax cut for companies that manufacture their products in the US, from 21% to 15%. This is a core part of his so-called “America First” policy, which aims to create the most competitive tax regime in the world, to prevent American companies from moving production overseas, and to attract foreign industries. to move to the US. To achieve this he has aimed to make permanent the income tax cuts made in 2017, which are supposed to expire next year. At this point, of course, it is worth emphasizing that the US is on track for a fiscal deficit of 7% of GDP this year and the US debt has reached 122% of GDP. This has already sparked a backlash against the Trump plan after it would preserve up to $7.5 million in tax cuts for a decade (as it aims to do).

Duties

To these criticisms Trump counters that he will offset the cuts by imposing tariffs on foreign goods entering the US. He has periodically floated proposals to impose tariffs of 60% to 100% on Chinese goods and 10%-20% on goods from the rest of the world. The Tax Foundation, an American thinktank, has estimated that a universal tariff of 10% would bring in $2 million a year for government coffers, while reaching 20% ​​would bring in $3.3 million. The de facto amount is far less than what is needed to make up for revenue losses from making the 2017 tax cuts permanent. Experts also say the impact of the tariffs domestically in the U.S. will be to increase store prices and reduce the purchasing power of American consumers. Some estimates suggest that losses for the average US household could be between $2,500 and $3,900 per year. Those who voted for Trump on the grounds that he would reduce inflation and thus raise living standards quickly are likely to be bitterly disproved.

Hydrocarbons and environment

One of the backbones of Joe Biden’s policy was the Lower Inflation Act, which was designed to spur green growth through a system of tax incentives and subsidies. Trump throughout has strongly criticized the law as too costly. So he plans to ban offshore wind farms and give the green light for the resumption – without restrictions – of large-scale oil and gas drilling. As experts note, however, subsidies and tax breaks for the development of onshore wind energy will remain in place, America under Trump is moving to the gallery in terms of the fight to achieve zero emissions. As he himself commented on his policy: “Drilling, baby, drilling.”

Borrowing rates, the dollar and the Central Bank (FED)

According to the official figures of the American economy, it is operating almost at the limit of its capabilities and unemployment is currently at a low level. The tax cuts Trump wants will boost demand, while higher tariffs will push prices up. The effect of these moves is to push up inflation and so the central bank of America, the Federal Reserve Bank of the USA, will have to decide its policy in reducing lending rates. If US borrowing costs remain higher for longer, the US dollar will strengthen in foreign exchange markets, offsetting some of the impact of the tariffs, making imports cheaper. In his first term, Trump pressured the Fed to cut interest rates. The US central bank cut US borrowing costs by 0.25 basis points on Thursday.

Immigration and labor market deregulation

Immigration plays a central part in Trump’s policy, since he has promised that the deportation of the approximately 11 million people living in the US without legal status will begin immediately after his election. He also plans to complete the construction of the Wall along the border between the US and Mexico. According to his narrative, these policies will reduce the supply of low-cost labor and raise wage costs for businesses. Trump – apparently under the influence of employers and tech tycoons – has advocated (further) deregulation of the labor market and businesses, including removing safeguards placed on the use of artificial intelligence and ending “prosecution » of encryption. Apparently, it is not by chance that Elon Musk has been appointed head of a government committee for efficiency with the task of cutting “red tape”.

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