The good, the bad — and the ugly.
This is how economist Joseph Quinlan divides “Trumponomics” as he described how some of the president-elect’s fiscal policies could either hurt or help Eastside businesses and the U.S. economy at large in 2017.
“Overall, it’s a very constructive backdrop for the U.S. economy and for companies in the [Eastside] area for 2017,” Quinlan told the Reporter after his recent visit to Bellevue, where he spoke at the Bellevue Chamber’s Eastside economic forecast breakfast.
Quinlan, the managing director and chief market strategist at U.S. Trust, Bank of America Private Wealth Management, forecast there are several “good” aspects of Donald Trump’s presidency.
While the U.S. economy has been expanding at a pace of about 2 percent a year and Trump vows to get the country to 4 percent, according to CNN Money, Quinlan forecast that Trump’s policies could spur the U.S. economy to break above a growth rate of 3 percent.
Quinlan said there will be a “firm demand” for a lot of goods and services that come out of the Eastside area.
“Technology I’m very bullish on globally because four billion people have never logged on to the internet, so that’s a huge digital economy growth path in front of us and I think it’s very beneficial for [Eastside] companies,” he added.
Quinlan also believes that Washington gridlock is now a thing of the past, given the Republican-controlled White House, Senate and House of Representatives. This means government officials are “showing up and they will do things,” said Quinlan, who regularly debriefs policy makers and legislators on Capitol Hill on global trade and economic issues.
This legislative action includes new government spending on upgrades to the nation’s roads, bridges tunnels and other infrastructure, which Trump has promised to spend up to $1 trillion on.
With the legislative gridlock behind the country, Quinlan also believes that could result in corporate tax reform. Fortune 500 companies are currently avoiding nearly $700 billion in U.S. federal income taxes on $2.4 trillion in offshore holdings, according to the Citizens for Tax Justice’s March 3 report.
But Trump seeks to end corporation’s use of offshore tax havens, which Quinlan predicted will bring trillions of dollars back into the U.S.
“We’ve got too much [corporate] cash sitting offshore not being put to work. And when you lower corporate taxes in the United States … you’re going to see a lot of money come in to the United States,” Quinlan said, noting that the U.S. has one of the highest corporate tax in the world.
As for “the bad” aspects of Trump’s fiscal policies, Quinlan said the country is likely to see the U.S. federal deficit grow.
“The down side perhaps could be higher deficits and debt levels later on, but that’s nothing the market’s going to have to wrestle with [now],” Quinlan said. “I think that’s a story for 2018 and 2019. Then we’ve got to keep a close eye on our trading partners and capital flows to strengthen the dollar.”
He said interest rates will move up, but many other countries will not raise rates. In addition, the U.S. dollar will be stronger, which creates problems for U.S. companies’ exports.
Quinlan also highlighted “the ugly” aspects of Trumponomics.
In favor of pro-trade, Quinlan said he is concerned about Trump’s anti-trade policies
and is worried that Trump’s policies could trigger a global trade war. He said he is concerned about the U.S. trade stance: “Politicians often don’t have a good understanding of how global supply chains work. These supply chains are largely invisible to politicians and tariffs on materials could really cause supply chains to suffer and our production to stagnate. Global supply chains are in the crosshairs of Washington politicians.”
Quinlan also noted that the TPP, which “is dead on the vine” was a “huge missed opportunity” for the U.S.
Another “ugly” aspect of Trumponomics is Trump’s push to close borders, which could hurt cities across the Eastside and the country that depend on immigrants to spur growth.
“It makes no sense to send home smart foreigners,” Quinlan said. “Immigrants make our country stronger.”
He noted the U.S. is a young country that needs people to “pick apples” and to work “at Apple.”
Other “ugly” aspects of Trump’s economic policies that Quinlan highlighted include populism, which he said is growing in popularity.
Quinlan also said that Trump’s vow to dismantle globalization is a “big problem.” The U.S. has created prosperity through globalization, and the country’s $18 trillion economy is dependent on economic trade and cooperation, he said.
Longer term, Quinlan is bullish about emerging markets and consumer spending in emerging countries. For example, he said smog in India presents an opportunity for GE to sell technology to reduce it. In addition, there are also growing healthcare needs in China. They have 20 million people suffering from dementia and 100 million people with diabetes. Addressing their needs presents an opportunity, Quinlan noted.
To capitalize on all the opportunities that Trumponomics may present in the next 12 months, Quinlan said Eastside businesses and others around the U.S. “should put the petal to the metal.”
“If you need capital — get it now,” Quinlan stressed. “Expect spending on infrastructure. Expect corporate tax reform. This will be good for near-term growth, but it is unclear how durable our economy will be over a longer period.”