Trump either makes good on his campaign promises or risks disillusioning his base…all while the economy hangs in the balance.
Ask a hundred people on the street if they feel a newly inaugurated President has any chance of keeping campaign promises during their first term, and you’ll likely see a lot of eye rolling and negative talk. Add Donald Trump to the mix and the level of doubt hits uncharted territory.
Does he have enough insight and pull to effectively navigate Congress or work through the intricacies of the United States government? Was his campaign platform simply created to forge a bulldozer’s path to the White House? Regardless of your take on President-elect Trump, he will likely support legislation that may dramatically alter our economy.
Most U.S. Presidents do a good job at keeping their campaign promises. Research staunchly supports this concept – one that many Americans would find hard to believe. Trump, though, places the U.S. in somewhat of a gray area – his “profit above all” mentality doesn’t necessarily align with what we’ve come to expect from Commanders-in-Chief in the past.
That, and he has zero political experience to draw on, or to provide us with any type of “best guess” as to his leanings. In the end, the pillars of his campaign that we’ll expect him to least act on will be: building “the wall,” bringing jobs back to America, and infrastructure spending. Let’s lay out what we anticipate seeing during his presidency.
The Wall — Building a wall between the United States and Mexico has been a cornerstone action item on Trump’s agenda since early on in his candidacy. The border itself stretches a whopping 1,989 miles, but if a wall were to be built, only about 1,000 miles of wall would be required as a host of natural boundaries (the Rio Grande, for instance) act as borders, too.
Economic impact: If a 40-foot-tall wall were to be built along 1,000 miles of border, this would require about $950 million in materials, plus at least ten times that in labor costs. Trump has vehemently campaigned on Mexico bearing the majority of the wall’s cost, but that is unlikely in any case. What may happen if the wall is completed, is a serious lift in revenues for building materials supply companies within 100-200 miles of the border. Six major cities could benefit – Los Angeles, Phoenix, Tucson, El Paso, San Antonio, and Austin. The downside to stifling trade between the nations? Lost dollars north of the border.
* It is estimated that 6 million U.S. jobs are supported or sustained by trade with Mexico.
* The U.S. and Mexico trade more than $1 billion every day.
* One in five U.S. jobs are connected in some way to trade along the border
The Director of the Congressional Budget Office estimates that the wall would shrink the labor force and reduce real GDP by $1 trillion.
Bringing Jobs Back to America — Most analysts and economists are quite skeptical about Trump’s ability to do this with any sense of urgency. As a nation (and world, for that matter), we’ve shifted from a manufacturing economy to a service-based economy. Simply building things here and then trying to sell them on the world stage won’t be enough – or even realistic.
Economic Impact: Trump will likely see little success in bringing jobs back to America – especially as he continues to talk about bulking up manufacturing. The fact is, we’ll see an economic benefit if he follows through on another campaign promise – renegotiating trade deals. He may have no real experience in politics, but he has spent a lifetime negotiation deals, and it isn’t out of bounds to think that a Republican-led coalition could create protectionist strategies that may boost national economic performance.
Infrastructure Spending — If there is one campaign promise that both Democrats and Republicans can get behind it is infrastructure spending. While both sides tend to approach the cost-factors associated with building new bridges, roads, and dams, no one wants to see bridges collapsing, dams failing, or buildings crumbling. Trump has a good chance at getting new projects started during his first 100 days, and that could make a lot of people happy. The only concern is how to pay for it all – especially in light of Trump’s proposed tax breaks.
Economic Impact: The jobs report could get a big lift from new infrastructure improvement jobs, which may lift share prices of companies that are big in the construction, mining, or transportation fields. One possible downside to spending up to $500 billion on these projects (as Trump has alluded to) while cutting taxes, is an increase in the Federal deficit.
Trump is an unknown at this point – but if his propositions come to fruition, the domestic economy – and that of the world beyond our borders, will experience a shift. Uncertainty may rule, which is a boon to gold investors and a threat to those investing in the stock market.
Although the information in this commentary has been obtained from sources believed to be reliable, American Bullion does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice. American Bullion will not be liable for any errors or omissions in this information nor for the availability of this information. All content provided on this blog is for informational purposes only and should not be used to make buy or sell decisions for any type of precious metals.