It’s true to say the election of Donald Trump to the US Presidency has caused quite a stir. The campaign itself was seen by many as divisive but, with the dust still to settle, opinions are as polarised as ever.
The Republican candidate, written off originally as a clown in sections of the media, has shown he must now be taken seriously. No matter on which side of the debate one stands, this is the new reality and Donald Trump will be inaugurated in January.
Champions Speakers, of course, has access to a wide range of the most respected economic and political commentators, so, with hype still flying in all directions, we hooked up with The Sunday Times Economics Editor David Smith to gauge his thoughts on the prospective Trump administration.
Speaking to us exclusively, David sees a duality in the President-elect’s possible economic approach.
“I see there as being two Donald Trumps here. The first is an aggressive tax-cutting Trump, who wants to simplify the tax code and lower the burden across the board, not only for the better off but also for people further down the income scale.
He speaks about slashing corporation tax from 35% to 15% and yesterday talked about an infrastructure programme, building bridges and roads and almost going back to the 1930s New Deal idea.
All this comes at a time when the US budget deficit, while not as big as ours, is not insignificant and is projected to rise from its current 3% of GDP even with unchanged policies, so there are questions.
This is the Reagan side to Trump, with tax cuts and some public spending, and it should lift the economy and benefit some of those who feel left behind.
The other Trump is the protectionist Trump. Even if he doesn’t build a wall along the Mexican border, he could pull the US out of NAFTA and put up some big trade barriers, such as tariffs on Chinese and Mexican imports. That will harm America in the short-term but, more importantly, damage the world economy.
So, for me, in terms of how much help he’ll be to those who voted him in, it’s a question of which Trump wins out. The expansionist, who doesn’t do anything rash on trade, gives cause for optimism but, if the protectionist comes out on top, I’d be more pessimistic.
We don’t know enough yet. But the kneejerk reaction first thing yesterday morning, pointing straight at disaster, isn’t necessarily the case.”
Election day also put the Republican Party in a position of dominance over the US legislature, causing some to fear Trump will have the freedom to make good on some of his more outlandish campaign promises. But David doesn’t think it will all be plain sailing for the incoming Commander-in-Chief.
“With control of both the Senate and the House of Representatives, Trump has the power to push things through, yet, as we saw to an extent with his acceptance speech, he may well row back on some of the more extreme things he’s promised.
In all honesty, he’s probably still quite astonished to have made it into the White House and will want to work with Congress. Republican control does make it somewhat easier but he has made a lot of enemies in his own party.
I don’t think they’re all massively protectionist and I don’t believe they’ve all given up on the idea that the deficit matters. That’s where the Tea Party exerted pressure, so I don’t think he’ll be given carte blanche, but it is better than it could have been for him.”
Turning to international relations, Smith again identifies two possible, competing dynamics.
“One thing we saw under foreign policy with Obama was a desire to reduce troop numbers in the Middle East and limit US involvement in Syria. I feel Trump, in some ways, will be a continuation of that but the danger is that his isolationism in foreign policy terms is combined with an isolation rooted in economic protectionism.
That is different to Obama, who tried to push through the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership. Trump has made it clear he’s not interested in any of that but I very much doubt he’ll suddenly change his ISIS strategy, for example, despite his campaign bravado.”
The prospect of Trump moving into the Oval Office has led to speculation that recent tensions between the US and Russia, described by some as a new ‘Cold War’, may ease. But David believes Trump will have to tread carefully.
“He can’t afford to be a pushover with Putin but I think he’ll try initially to work with the Russians, not wishing to create unnecessary problems.
Again, that’s not so much of a departure from Obama, who, for all his criticism of the Russians over Syria, never backed it up with meaningful action. The Trump administration isn’t going to cross the street looking for trouble with Putin in quite the same way Hillary Clinton might have done.
In terms of Europe, I think Trump might have sympathy with the idea Russia was provoked over Ukraine and he’s not particularly sold on NATO’s eastward expansion. It is staggering, when you look at the figures, that America has been prepared to fund 75% of NATO’s budget for this long.
A shift at that level could well be a real problem for Europe and not just for the Baltic states. At a time when public finances are still stretched, can they afford much more defence spending? That said, there will be issues with Putin where he will need to respond. Sooner or later Donald Trump will have to flex his muscles.”
David Smith is The Sunday Times Economics Editor and a highly perceptive finance speaker, who draws from a deep well of knowledge to deliver enlightening keynotes at conferences and functions all over the world.
To take advantage of his insight and prepare your team for the future, book David Smith for your company’s next event by calling a member of our team on 0207 1010 553 or fill out our online contact form.