Trump’s victory: key economic areas to watch - Wells Fargo
According to analysts from Wells Fargo, economic policy uncertainty will likely be on the rise following Donald Trump’s victory.
Key Quotes:
“We are likely to see changes in many non-tariff barriers to trade as well as government actions to alter market-determined patterns of exchange rate and capital flows. Trade works in complex patterns. First, there are losers from protectionism as well as from more open trade relations. Consumers pay higher prices as do producers that utilize the protected products. Second, protectionism creates a political special interest group that engages in rent seeking. International supply chains are complex and political intervention alters the calculus for trading partners.
“Trump’s proposals to lower and simplify the corporate tax system should have a positive impact on business investment and thereby productivity gains. Lower business profit taxes should improve the expected rate of return on investment. Reduced regulation should improve entrepreneurship as business start-up costs should be lowered. However, it is not clear how much lower taxes will wind up as productive real investment. Moreover, productivity gains also reflect gains in the quality of the labor force, which in part reflect immigration and education reform.”
“In the short-run, the disruption and uncertainty about policy will lead to caution on the part of both households and businesses while the rules of the road are made clear.”
“Policy uncertainty could lead to households or businesses delaying consumption/investment.”
“While the case for additional infrastructure spending is made in principle, our concern is the practicality and efficiency of such spending. Administrative barriers are a central issue for any project.”
Author
Matías Salord
FXStreet
Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.
