The time for campaigning is over and Donald Trump has inherited the daunting tasks to unite a divided United States. What will be the TrumpOnomics impact on global economy? Can he fulfill his promises?
10 November, AtoZForex – Donald Trump was elected as the next US president, promising to restructure country’s tax and trade policies in order to improve growth and create jobs. Will his initiatives be implemented? Will they bring the results?
TrumpOnomics impact on global economy: Taxation policies
During the campaign for president Donald Trump promised to impose a huge tax reduction. The plan encompassed US citizens who pay income taxes at a rate of 10,20 and 25 percent, depending on their level of income. Based on the plan, Americans that earn less than $25,000 a year along with couples earning below $50,000 would not have to pay income taxes at all. Whereas, the tax rate for high-income earners would be cut from 40 percent to 25 percent. In case Trump’s tax reform passes through Congress over 60 million of US households will not need to pay income taxes starting from 2017.
Furthermore, he proposed to reduce the US corporate tax rate from 25 percent to 15 percent, whilst revoking inheritance tax.
According to the Tax Foundation, these changes may lead to a loss of tax revenue in the range of between $2.6 trillion and $3.9 trillion over the next 10 years. However, the economy advisors of Trump stated that these measures can be offset by eliminating the loopholes through which US major corporations have been avoiding paying taxes. Besides, advisors believe that the proposed tax reductions can boost the economy facilitating a higher tax intake.
What can be the impact on the main trade agreements?
It is anticipated that the administration of Donald Trump would investigate all the trade agreements between the US and other nations. During his campaign, Trump criticized the North American Free Trade Agreement (NAFTA) between the US, Canada, and Mexico, stating that the pact negatively impacted the US economy and workforce. Therefore, Trump said he would negotiate better terms with Mexico and Canada. In case they didn’t agree, he’d withdraw from this deal. Referring to the Trans-Pacific Partnership that involves the US and 11 other Pacific Rim countries, this agreement will most likely not be affirmed under Trump Presidency. The same is with the Transatlantic Trade and Investment Partnership (TTIP).
Referring to the Trans-Pacific Partnership that involves the US and 11 other Pacific Rim countries, this agreement will most likely not be affirmed under Trump Presidency. The same is with the Transatlantic Trade and Investment Partnership (TTIP).
Furthermore, it would be more difficult to access the US market for South Korea, China and Japan due to the higher import duties that are already being considered.
Interdependence of Germany and the US
The Germany’s economy is highly reliant on the US market as exports to the US represent 10 percent (114 billion euros) of the European country’s total exports. Whereas, imported goods from the US constituted 6 percent (60 billion euros) of all German imports. The data indicates that Germany benefits from a huge surplus in its trade with the US.
More than 1 million jobs in Germany are directly or indirectly dependent on exports to the US. Also, US firms running their businesses in Germany have created a further 630,000 jobs. Thousands of Americans are working for German companies in the US. For instance, the US subsidiary of German DHL employs around 77,000 Americans.
The investments of German firms into the US constitute over 271 billion euros, with 50 largest companies generating revenues of $400 billion annually. Companies from the US have also invested in Germany, with 50 biggest entities earning more than 170 billion euros.
Donald Trump will unlikely be against the bonds between these two nations but he may concentrate on the present trade imbalance.
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