Counting the Cost

Is the US recovery all down to Trumponomics?

We examine how President Donald Trump’s bold fiscal and economic policies have affected the US and global economy.

When US President Donald Trump took office one year ago, he promised that economic protection and his “America first” approach would lead to great prosperity and strength.

He also vowed to change course on a number of international policies and agreements. That prompted warnings he might boost the US economy in the short term, but trigger a global depression.

Since then, there’s been a number of positive economic data on the domestic front. The Dow Jones Industrial Average has raced past the 26,000 mark for the first time in history.

So how much credit can Trump take for some of the gains seen on the domestic front?

James Knightley, the chief international economist with ING Bank, says he [Trump] “can’t really claim all that much. There was a huge amount of domestic momentum that really left retail sales, industrial production and consumer demand in general really, really quite strong.”

“But also another thing he [Trump] can’t claim, “is the strength of the global upturn. What has really caught economists and strategists by surprise is the strength in external demands – the strength of Europe, the recovery in Asia. This has come far quicker and far more aggressively than anyone had been expecting, so that in itself has also boosted the US because stronger export markets for US products have really boosted overall economic demand. And the dollar softness has made the US more competitive,” says Knightley.


by ”James


In the early phase of his presidency Trump pledged to protect US markets, but “he seems to be coming around to the idea that trade is good, trade creates US jobs as well, and American companies do benefit from trade – so his aggressive stance has perhaps moderated to some extent.”

Knightley says that Trump’s direct method of influencing trade has been “tweeting – threatening or rewarding companies that have or haven’t decided to invest in America – particularly American-based companies. So those threats and rewards have influenced policy to some extent, but of course we also have tax reforms.”

“The tax cuts in general have incentivised more companies to consider putting money to work in America – if you get to keep more of your profits, then that’s a good reason to invest… More US companies will consider bringing money back. But of course you have to look at the global growth environment, which is very good.” 

“It’s a very positive US growth story for the next year or two”, but Knightley is also encouraged about the global growth prospects, saying there’s positive news coming out of Europe, Asia, and Latin America. “So what was just a US growth story is becoming much more global.”

China’s muddied economic growth

In 2017, China’s economy grew by 6.9 percent, its fastest pace in two years.

That has confounded economists because how can a country achieve both economic acceleration and at the same time a credit slowdown? 

According to Reuben Mondejar, professor at IESE Business School, “the macroeconomic policies are working and 2017 was a good year for China.”

“In 2015-2016, China was caught “red-handed” manipulating stock markets,” explains Mondejar. Compelled to change its image, the country’s leaders took initiative so “that has been corrected in 2017. The effect of those policies have not only stabilised things but given rise to new products which offsets the negative effects… So you may see it as a contradiction, but when you look at the overall effort, the effects of the economic policies have overridden the negative consequences of bad activities, falsely reporting … In the big picture, we’re seeing a 2017 which has a more clean figure reporting and we expect that 2018 will be the same if the ‘watchdog’ mentality of the government continues to be done in the correct way.”

Also on this episode of Counting the Cost:

Baby milk scandal: One of the world’s largest dairy companies, Lactalis, is facing millions of dollars in damages over a baby milk scandal. Police are now investigating the French company after it was accused of trying to cover up the extent of salmonella contamination at one of its plants. More than 12 million boxes of powdered baby milk in 83 countries have now been recalled, as Natacha Butler reports from Paris.

Apple jobs: Apple has announced that its going to create 20,000 jobs for American workers. The iPhone maker says the investment will contribute $350bn to the US economy over the next five years. The US tech giant has faced criticism in the past for employing huge numbers of workers in Asia. It has also taken flak for avoiding US taxes by keeping cash reserves in foreign bank accounts.

Mexico remittances: Mexicans living abroad sent home $26bn worth of remittances last year, with the majority of that money coming from the US. For many in Mexico’s poorest communities, money transfers are often the main source of income. However, with possible changes in US immigration policy, many could see some of them badly hit. Manuel Rapalo reports from the southern Mexican city of Oaxaca.