Analysts at Nomura explained that the success of Trump's policies in raising economic growth and incomes will depend, importantly, on the degree to which those policies boost productivity.
"Two key themes of Trump's policies are tax reform and deregulation. If done well, these policies could increase productivity growth. But the scale of these effects is hard to know and history suggests that caution should be in order."
"19 The late 1970s and the early 1980s was a period of significant deregulation, started under President Carter and expanded under President Reagan. In addition, the last significant reform of the US corporate tax system was completed in 1986. There is little evidence that deregulation and tax reform increased productivity during this period. Figure 9 shows the trajectory of multi-factor productivity since 1973."
"Formal statistical analysis suggests that productivity growth slowed in the early 1970s and it did not accelerate until the mid-1990s.20 In other words, deregulation and corporate tax reform in the 1980s did not seem to generate any notable acceleration of productivity growth.21 While we accept that Trump's policies may increase productivity growth somewhat, we doubt that these positives effects are large enough to provide a significant counterbalance for the negative effects of Trump's immigration policy on aggregate supply. Consequently, our forecast is based on the judgment that Trump's economic policies will not materially alter potential growth."
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.