Since January 20th, when he assumed the presidency of the United States of America, not a day goes by without Donald Trump being at the center of controversy. This is sometimes due to his own policies, but also because of certain interests within powerful economic lobbying groups . It's true that one of the most powerful men in the world is constantly being discussed. But are you really clear on what his main economic measures are?
Well, it's not very easy to decipher them either, since campaign rhetoric is one thing, and what he actually does starting this week is quite another. This is further complicated by the fact that he might even be under the scrutiny of the all-powerful US Congress and Senate . Although controlled by Republicans, these bodies could create more than a few problems for him in implementing his economic policies, not only domestically but also internationally. In this regard, it's important to remember that elected officials don't adhere to party discipline, as is the case in Spain. Given this situation, there could be more than a few surprises from this point forward.
In any case, one thing is clear: their economic decisions will affect you as a citizen of the European Union. One of the battles to be fought is the economic relationship between the two economic zones. It promises to be very tough, but also fascinating. Another crucial aspect will be how the financial markets react to their economic program. Many analysts will be closely watching the stock market's performance in these first few weeks, on both sides of the Atlantic. This could even determine the market's direction, one way or the other , after a rather uneventful period of neutral trading. As you'll see, many questions remain unanswered in the early stages of the new year.
Donald Trump: economic program
The Republican representative's rise to the highest office in the United States has already offered a glimpse into his economic policies, through his first two measures. First, he has withdrawn from the Trans-Pacific Partnership (TPP) , which includes eleven other nations. Since 2008, this trade agreement has included Australia, Canada, the United States, Japan, Peru, Malaysia, Mexico, and Vietnam, among others. Conversely, it appears his intentions are to strengthen relations with the United Kingdom. In this scenario, one of the main losers would be the EU, and a protectionist war between the two regions cannot be ruled out.
The fragility of EU positions could have economic repercussions among the member states. It is not entirely impossible that this shift in international relations could lead to a downturn in the European Union. This is further aggravated by Britain's departure from EU institutions this summer, following the overwhelming victory of Brexit. All of these factors will undoubtedly be reflected in equity markets worldwide sooner or later , markets that are, moreover, highly sensitive to this type of economic measure.
More employment and protectionism
Another economic plan that has been implemented concerns employment, specifically the relocation of factories by a significant group of companies over the past few years. These companies primarily come from the automotive sector, but also from other sectors with considerable weight in the American economy: steel, pharmaceuticals, new technologies, and so on. Several multinational corporations have accepted Donald Trump's conditions and will develop their business models on American soil.
Among them are the European automakers Fiat and Volkswagen, which will invest in the United States . Specifically, Fiat has already announced a $1.000 billion investment in the US, while the German group stated it will produce its electric cars in the major economic powerhouse. One of the main effects of this move is that many companies are already canceling their multi-million dollar investments in Mexico. Another almost immediate consequence is that the unemployment rate in the US could fall to historic lows in the coming months. Indeed, the estimated number of new jobs created exceeds half a million.
Tension in the currency market
All these economic plans will have collateral damage, mostly reflected in the already volatile currency markets, with sharp fluctuations among the most affected currencies , especially those related to the euro, dollar, Japanese yen, and Mexican peso. This could be the moment for a savvy investor to reap significant profits on positions held in some of these financial assets. Conversely, it could mean losing a lot of money if the currency choice isn't the most appropriate.
Shocks in the currency markets can be very violent. Very conducive to doing tradindg. Operations in a short space of time that can be very profitable for your interests. Although for this, it will be necessary that you write down a deep knowledge of this financial market. Not in vain, the economic policies of the new president of the United States are going to give a lot of play. Perhaps it is the financial asset that will show the most activity during the first months of tenure.
Radical lowering of taxes
One of his most dramatic measures is the sweeping tax cut. It will affect both individuals and large corporations, dropping the tax rate from 35% to 15% . That's a significant reduction of nearly 20% for the major players in the American economy. This will have repercussions for both segments of society, leading to further interpretations of the greater tax relief. And, of course, this kind of relief is usually very positive for the stock market.
Citizens, on the one hand, will see more money in their pockets , which will significantly boost consumption. As a consequence of this measure, economic growth across the Atlantic will also be stimulated, with a more than foreseeable increase in its Gross Domestic Product. In all cases, this will strengthen this important country's position in the productive sphere.
This tax cut, as far as businesses are concerned, will have a stimulating effect on their activity. It could even trigger a surge in job openings in the coming months, through a program that takes advantage of this new tax environment, something the US economy hasn't seen in many years. This is also being viewed positively by all investors.
Less regulations
Eliminating these administrative hurdles for businesses is another key pillar of Donald Trump's economic program. It will bring much greater agility and flexibility to the American business sector, with the ultimate benefit impacting all citizens of this vast country. As in the previous cases, employment will also be one of the major beneficiaries of this ambitious measure.
While it remains to be seen what the promotion of fairer trade with other countries will entail, this will need to be clarified from this point forward. Although some prominent economists on the international stage are not very optimistic about one of President Trump's most controversial initiatives, particularly regarding relations with his closest neighbors and the Asian continent, which has seen moments of evident friction with some of its most representative nations , such as China.
Investment in infrastructure
Another key measure in his program is the investment of nearly one trillion dollars in infrastructure . This massive investment is projected to be made over ten years through public-private partnerships, facilitated by tax breaks that will take effect in the coming weeks. As a result of this significant investment plan, construction companies will be among the main beneficiaries, experiencing a higher volume of business than they have had to date and a foreseeable increase in their stock market valuations.
It should also be noted that he will lift restrictions on fossil fuel production. Renewable energy is the downside of this measure, as it will be the hardest hit in this new scenario emerging in the United States after Donald Trump's rise to power. Among his most significant proposals is his firm promise to raise the minimum wage to ten dollars an hour.
These are, in short, some of the economic suggestions that will be carried out from the last week of January. Although, surely, some of them will not be undertaken or at least will be forgotten depending on the control that the two US chambers will carry out. Either way, it can be used to formalize your operations in the financial markets. Whatever its nature and financial asset selected during this year.