Qatar National Bank (QNB) expects that the second term of US President Donald Trump will bring a major change in the US economic agenda, especially in the areas of finance, trade and immigration.
The weekly report by Qatar National Bank QNB said: Although the US elections are considered a local event, domestic policies in the United States have a global impact and will determine the pace of global economic growth over the next four years.
The report pointed out that the proposed agenda is likely to be less extreme than the election campaign promises indicate, and growth prospects in the United States would remain positive, with the expected long-term GDP expansion of 2.5 to 3% annually.
The report indicated that the American economy is not only critical to achieving long-term American prosperity, but it also plays an essential role in achieving global stability.
The report considered that the world has benefited, directly or indirectly, from the broad infrastructure of the American market, its deep financial system, and its strong regulatory frameworks, pointing out that in light of expectations that the nominal gross domestic product of the United States will reach 29.2 trillion US dollars in 2024, out of a total of 110.1 trillion US dollars. Trillion dollar global economy, the United States operates on a scale unparalleled by other economic powers.
The report said: From this standpoint, we must understand the repercussions of the US elections on the global economy, especially since President-elect Donald Trump has a comprehensive economic agenda.
Trump’s economic agenda, based on the slogans “Make America Great Again” and “America First,” favors business, capital flows, trade, and domestic manufacturing as he supports deregulation, reducing bureaucracy in key sectors, and cutting taxes on corporations and households. Increasing public investments and providing subsidies to the local manufacturing and defense sectors, and taking a highly protectionist stance in dealing with foreign trade.
In this context, the report stressed the importance of separating the president-elect’s rhetoric from the facts on the ground and the actual decision-making process, especially when it comes to important topics such as financial policies, foreign trade, and immigration.
The report added that the first chapter relates to the financial sector, where President Trump appears already committed to a mixture of tax cuts and innovative initiatives to improve spending. During his election campaign, he proposed reducing corporate taxes from 21% to 15%, which confirms his commitment to the strategy through which he achieved results in His first term as president.
The report suggested that the individual tax cuts he agreed to in 2017, which are scheduled to expire at the end of 2025, will also be extended during President Trump’s term, while it is expected that these financial measures combined will reduce government income by $3 trillion to $4 trillion. American.
The report indicated that in order to balance this decline in income, President Trump proposes an ambitious government efficiency plan to reduce fiscal spending by up to 2 trillion US dollars. This initiative will be implemented through a new government efficiency committee scheduled to be led by Elon Musk, a man. The billionaire business tycoon is known for his tremendous ability to rearrange supply chains to reduce costs and speed up time to market.
The report considered that if the Trump/Musk initiative succeeds, the new financial position will be favorable for the private sector, stimulating more consumption and investments without creating additional pressure on the government’s financial situation.
Regarding the second chapter, which was covered in the weekly analysis by Qatar National Bank QNB, it concerns trade, as Trump is expected to relaunch his protectionist agenda after the president-elect proposed during his campaign to impose higher customs tariffs of 10% as a minimum on imports from the rest of the world. And 60% on Chinese imports.
The report found that if this proposal were fully implemented, it would likely create a major shock in trade and investment flows as other countries could respond in kind, which could create a spiral of “beggar-thy-neighbour” policies through competition in devaluing currencies and increasing customs tariffs. This will also be negative for consumers globally, as it will increase costs and lead to inefficiency.
Although this scenario exists, the bank’s report does not expect President Trump to fully implement his promises related to his trade agenda.
Regarding immigration, the report expected that President Trump would soften his tone and adopt a more realistic stance now that the campaign had ended, as he proposed not only the mass deportation of approximately 15 to 20 million illegal immigrants, but also restricting the flow of legal immigrants who hold visas.
The report considered that this would contribute to tightening working conditions, especially in the area of hourly work in low-wage jobs. However, given the importance of additional labor supply growth in the service sector and the positive outlook for more favorable demographics of the US economy, we do not expect these measures to be implemented.
In this regard, the weekly report of Qatar National Bank (QNB) suggested that Trump would come up with an approach that eases the strictest screening controls for legal immigrants and the limited and targeted deportation of specific groups that are not well integrated into the American economy. Thus, the potential negative impact on growth resulting from the decline in immigration. Weak demographics will be limited.
