Donald Trump will become the 45th President of the United States. He will take up his duties on January 20, 2017. He needed to collect 270 delegates to enter the White House, and he obtained 290. Donald Trump won in the majority of swing states, which is a big surprise. However, Hillary Clinton won the popular vote (which only has a symbolic value) with a lead of about 630,000 votes (0.5% of votes cast).
The Republicans retain their majority in Congress (House of Representatives and Senate) with respectively 239 members in the Lower House and 51 Senators (out of 100). In theory, Donald Trump would therefore be able to implement his programme as it stands. However, in practice, he will have to convince his party of the advantages of building a wall between Mexico and the United States, of sending back more than 11 million migrants living in the US, of renegotiating the trade agreements that have so far been ratified by the US or of imposing prohibitive customs duties on some countries (such as China or Mexico). It is highly unlikely that he manages to achieve this.
In addition, on the fiscal front, the Trump candidate’s proposals would lead to a sharp increase in the deficit and debt (the fiscal cost over the next 10 years is estimated at more than $5,300 billion). However, the Republicans in Congress, who are traditionally highly opposed to allowing the deficit to slide (unless there is a threat of recession), propose financing the tax reductions by major cuts in social spending programs.
The financing debates are likely to be strained. The scale of the victory gives Donald Trump a certain footing in a very divided Republican party. The future president will probably seek to surround himself with members of Congress who did not support him or provided little support. In the final analysis, it is therefore reasonable to expect the implementation of some of his proposals, notably in terms of taxation (with tax cuts probably more targeted towards the least-favoured classes) or infrastructure spending. With, all things considered, a slightly positive impact on growth (but probably not before 2018) and virtually neutral impact on the deficit.
Can Donald Trump go much further in terms of fiscal stimulation? What type of man is he really (a man of compromise or an autocrat)? How will he surround himself? To implement what type of policies (in practice)? The expected impact on the economy (growth/inflation), interest rates and the dollar ultimately depend on the answers that he provides to these questions.There is immense uncertainty. Especially as the US economy is at the end of the cycle. In these conditions, the next move by the Fed – expected in December – is itself in question.
Head of Macroeconomic Research
More important than the outcome of the presidential elections per se, attention should be paid to the configuration of the new congress: the economic impact of the elections will depend substantially on its colour. The American elections on November 8 will pit Hillary Rodham Clinton (Democrat - New York) against Donald Trump (Republican - New York), Gary Johnson (Libertarian - New Mexico), and Jill Stein (Green Party - Massachusetts). The next President will take office on January 20, 2017.
Didier BOROWSKI, Philippe ITHURBIDE