With the Trump White House, America and a global economy will enter a highly divisive period – as evidenced by the debate about his economic, trade and infrastructure plans.
As long as Republicans sustain some unity in and between the White House, the Senate and the House of the Representatives, Trump will benefit from an unprecedented execution power.
To get the economy back on track, Trump’s economic objective is to create 25 million new jobs in the next decade, return to 4% annual economic growth, lower and reform US tax codes. But truth to be told, the growth objective will be undermined by his own trade, tax and immigration policies.
To former President George W. Bush, American security meant that “either you are with us or against us.” US economy has the same significance to Trump – his trade policy is an extension of his domestic economic policy.
Trumping trade – and the Fed
The Trump administration’s “America First” mantra is predicated on a withdrawal from the Trans-Pacific Partnership (TPP) and a renegotiated North American Free Trade Agreement (NAFTA). If Canada and Mexico cannot see Trump eye to eye in the coming talks, the President will simply give notice of the US intent to withdraw from NAFTA.
The new White House intends to crack down all nations that violate trade agreements, as the Trump team sees it. Working together with his top trade executives – who are vehemently against free trade and tend to hold strong anti-China views– Trump has already targeted the biggest US deficit contributors, particularly China, Japan, Canada and Mexico.
The new White House’s trade initiatives have major consequences not just internationally, but for US domestic economy.
According to US Treasury data, major foreign holders of US treasury securities – China, Saudi Arabia and Russia – have reduced their holdings by almost $250 billion since last March. The effect of foreign selling of US treasuries looks like the kind of foreign liquidation that Washington has feared for years. It is also adding to the Fed’s challenges.