About Last Night
The people have spoken. The 45th President of the United States will be Donald Trump. In the first-wave after
any seismic event people look for the quick answers. On the morning after, everyone is trying to discern what
this means for the American economy; the spillover impact will be felt throughout the Global economy, given the
USA’s leading position in the world. So what will the impacts be?
The platforms that Trump has run on suggest reduced immigration, barriers to trade, lower taxes, and reduced social
programs. Having won the Presidency alongside the Republican majorities in the House of Representatives and
the Senate, he will have the ability to enact legislation almost unopposed, the platform he ran on will very likely
be 2017’s legislative calendar. Trump’s plans in the campaign were often shy on specific detail, which lends a lot
of hope; politicians and their policy mandarins will step into the breach and offer guidance, making the legislation
less arbitrary and more constructive. Obviously it is impossible to offer specific comments on theoretical laws, we
can only visit his policies from what we know to be publicly disclosed.
Running on a platform of reducing immigration ignores the benefits derived from it. Immigration offers the
opportunity to enhance culture, science, commerce, and the arts by admitting the talented. Immigration offers a
labour class to do the ‘dirty work’ that Americans would prefer not to, gardening and bussing dishes and driving
taxi cabs. Immigration lowers costs and creates opportunities for growth. Ironically, the US, a nation of immigrants
and built by immigrants, now views a closed border as preferable.
Trade treaties viewed as unfavourable by Republicans are in danger of being ripped up. While this makes for an
excellent talking point, it dismisses the fact that nations are not obligated to accept terms they cannot live with,
it dismisses the fact that open trade is good for everyone – even Americans, and it dismisses the advantages to the
average consumer who can buy goods from their least costly provider. Trade is good, more trade is even better.
Taxes are likely to come down for Americans, which means that deficits are likely to rise. While this enriches a
certain constituency, it leads to increased interest expenses, which means every day more American productivity is
taken out of their economy and exported overseas. Interest on borrowings is already a non-trivial portion of Gross
Domestic Product, reduced taxes are a wonderful promise, but it comes at the cost of having more national debt,
which is a tax in and of itself.
The initial reaction from the markets was negative, but there have been more than fifty days where the markets
have moved more than 3% since the 2008 financial collapse; markets crest and fall, but over the long run they
turn positive. The Global economy digested Brexit in a matter of weeks, with myriad outcomes and so much still
unknown about Britain’s future the FTSE100 is up 9.3% including dividends. Instead of a knee-jerk reaction,
adopting a sober long-term view will benefit investors. The unemotional, patient, and calm tend to be the most
successful investors. The global economy has shown itself to be incredibly resilient time and time again, the US
economy led the way out of the last recession. Time is still on our side, we intend to stay the course.