US Politics: No imminent tax cut, but a potential election pledge - ABN AMRO

"President Trump sowed confusion over the weekend with a claim that the Republican Party would enact ‘a major tax cut for middle-income people’ before the midterm elections on 6 November,"  point out ABN AMRO economist Bill Diviney.

Key quotes

"While the media has struggled to confirm what Trump was referring to with this claim, it is impossible for Congress to pass any tax cut at this stage given it is already in recess ahead of the elections. What is possible is that the President turns this claim into a pledge to implement such tax cuts should Republicans retain control of the House in the elections."

"A Republican win looks unlikely given the latest opinion polling, but by no means impossible. Indeed, the Party’s popularity is closely linked to the President’s approval ratings, which have recovered to -7.8 points from a low of -13 in September, as the controversy over ‘hush money’ paid to Stormy Daniels has receded from the headlines, and positive newsflow on the US economy has continued."

"The President’s recent success at negotiating an updated trade agreement with Canada and Mexico has also likely helped, with Republicans now leading Democrats on trade issues in a recent Wall Street Journal/NBC survey by 17 points, up from 8 points in an August survey. Further tax cuts in the event of a Republican midterms win is a possibility we have highlighted in our preview for the elections, and could have significant implications for the US economy over the coming years."