US: How tough is Trump? - AmpGFX

Greg Gibbs, Director at Amplifying Global FX Capital, points out that Trump and Republicans have said they will now concentrate on tax reform as this is more important for boosting the growth outlook. 

Key Quotes

“Trump has said he is prepared to work with Democrat to push through his agenda.   He and his press supporters did try and deflect blame a bit to the right-winged Freedom Caucus, House Speaker Ryan and Democrats.  But Trump has not gone on a Twitter storm turning on his own.”

“Trump has, however, continued to run his own spin on twitter; arguing that Democrats will soon come to him to renegotiate healthcare when Obamacare fails, deflecting the Russia controversy to the Clintons and their aides, taking credit for a new investment by Ford in Michigan, promoting his media supporters on Fox and Friends, and taking swipes at the New York Times and other “fake” media. He tweeted, “If the people of our great country could only see how viciously and inaccurately my administration is covered by certain media!”

“However, Trump spins it, the market must now wonder how successful Trump/Republicans will be in crafting a tax policy that will pass Congress.  Many believe this will be just as difficult, if not more so, as finding agreement on healthcare.”

“A key issue is how to pay for tax cuts.  The controversial border tax is supposed to raise revenue, but lacks widespread support.  The reform of healthcare itself was supposed to make some budget savings, but this has failed.”

“A further problem is that Trump has promised so much with respect to tax reform that he can’t possibly deliver.  Part of the reason the Healthcare bill failed was that House Republicans could not draft a bill that could meet the lofty conflicting promises made by Trump.”

“Furthermore, one must wonder at the Democrats willingness to work with Trump on tax reform or Healthcare after the large number of executive orders since taking power, many of which they disagree with, affecting immigration, climate policy and family planning.”

“One of the confusing contradictions in the market is that consumer confidence appears so strong, and yet the approval rating of Trump appears so low.  The chart below shows that Trump’s job approval rating has dropped to around 35%, a new low, in the wake of the Healthcare bill failure.  This is amongst the lowest for past Presidents.”

“It remains the case that the Republican’s control both houses of Congress and the Presidency and, theoretically, should be able to pass more legislation, which is a source of optimism.  But at its first major test it has failed, and the signs are that bipartisan support will be required to make substantial reform.  An unpopular and divisive president, facing allegations of inappropriate links to Russia, will struggle to drive negotiations across the aisle.”

“The risk is that economic optimism still apparent in US surveys fades as the aura around the Trump presidency fades.”