QNB said that it expects a Trump second presidency to bring major changes to the US economic agenda, especially in the areas of finance, trade and immigration.
In its weekly report, QNB said that the proposed agenda should have mixed effects on growth, with fiscal policies set to boost economic activity, while trade protectionism and tougher immigration measures would weigh on GDP growth.
The report noted that the US election is not purely an American concern, as the countrys power, wealth and influence reverberate globally. The report noted that the fact that the US has a nominal GDP of USD 28.8 trillion that is far bigger than other major economy, and a household net worth of more than $150 Trillion makes it at the core of global movements of information, capital, goods and services. The report stressed that no other country plays a similar
role in determining the direction of the global economy.
As a result, the report argued that it is important to understand the implications of the US election for the global economy, particularly as each of the two main candidates (Donald J. Trump and Kamala Harris) have different economic agendas.
The report focused on three key areas of Trump's economic policies. The first is that Trump tends to be aggressive in terms of fiscal stimulus.
"In fact, during his term as president, tax cuts and higher spending took government deficits from a lower than average 3.6% of potential GDP to 6% in 2019, before the pandemic required even wider deficits," the report said.
The report noted that Trump is proposing a reduction in corporate taxes from 21% to 15%, and that individual tax cuts that he approved in 2017, which are set to expire at the end of 2025, are likely to be extended under his potential presidency. QNB noted that this would cost $3 trillion to $4 trillion in
revenues. And that in turn would widen the budget deficit, but it would also provide a boost to the economy, by supporting both investments and consumption. The bank added that those policies would also support long-term US Treasury yields.
The second is that Trump seems to be committed to re-launching his protectionist agenda. He is defending the imposition of higher external tariffs of 10% minimum on the rest of the world and 60% on China in particular.
"If such measures were to be fully implemented under a potential Trump administration, and not only used as leverage for trade and investment negotiations, they would likely create a significant shock for trade and investment flows," the bank said in its report.
The third is Trump's immigration policy, which the report noted could have significant implications for the country's demographics and labour markets. Trump suggested not only the mass deportation of 15 to 20 million undocumented migrants, but also restricting the inflow of visa-holding legal migrants.
"While we do not expect this to be enacted at this scale if he is elected, even a less aggressive deportation programme would contribute to tighten labour conditions, particularly in the low wage hourly compensation space. Over the medium term, this could increase the average wage growth, creating additional inflation pressures," the report said.
QNB concluded its weekly note by saying that an eventual Trump presidency "2.0" would bring significant change to the US economic agenda, particularly on the fiscal, trade and migration spaces. It said that the proposed agenda should be a mixed bag for growth; with fiscal policies boosting
activity while trade protectionism and a stricter handling of migration would weigh on GDP growth.
