After Donald Trump won the presidency becoming 45th president of the USA on November 11th, 2016, the overall world financial markets fell in panic. S&P 500 where business dealings are operating for almost twenty-four hours and E-MINI Nasdaq 100 have collapsed by 5% after the election. KOSPI which is Korean Composite Stock Price Index dropped forty-five points. In addition, the value of Mexico peso decreased over 10% rapidly which reached its lowest percentage as the international currency rate fluctuated. As a countermeasure, circuit breaker, a policy to prevent from a serious slump in stock, and stock stabilization policy were implemented. Trump will have all the authority of the USA government and the support of the Republican Congress from late January 2016. Since the USA is the richest and the most powerful country all over the world, his position and decisions could bring profound changes and great impact. The economic consequences under Donald Trump’s presidency will be enormous and influential.
Donald Trump aims to rehabilitate the USA economy and improve the welfare of the middle-class by reducing tax and implementing relaxation of regulation. His plan is to lessen income tax, 39.6% to 33% for the top layer (the upper-class) and to abolish inheritance tax. He also insists trickle-down effect by reducing corporate tax from 35% which is the highest figure to 15%. This arrangement would mostly benefit the upper class and would limit the increase in aggregate demand of the USA but at the same time increase the government deficit. Moreover, Trump is looking forward to expanding government spending in the national security and in infrastructure According to the statement from Son Sung-won, the chair-professor of California University, the debt-to-GDP ratio of the USA would rise up rapidly from 78% to 105% in 2026. The biggest problem is that there’s no specific plan in supplement of lacking finance of the government. Therefore, even though there’ might be some positive effects in the USA economy from the reduction in taxes, deregulation and growth of expenditure, it is expected to work as a short-term effectiveness but eventually brings negative side effects.
The main idea of politics of Trump is “America First” and, occupation, income and security for Americans are the highest priority. He asserts to look over and plans to rearrange treaties in free trade such as TPSEP (Trans-Pacific Strategic Economic Partnership) and the North America Free Trade Agreement (NAFTA). He is also likely to implement economic policies that pressure other countries using financial power of the USA. These strategies aim to promote and reinforce the radical protectionism of domestic industry. Paul Krugman, the professor of City University of New York who was awarded a Nobel Prize in Economics, said that the election of Donald Trump could bring world recession like the Great Depression. It might be beneficial to the USA economy itself, however, it would give a heavy burden to the world economy which is in failure if the world largest exporter and importer reduces its commerce.
The first victim country by strong protective trade under the Trump’s government would be China. The USA and China have been competing for trading in the global market for many years. Trump considers China as the country which manipulates its exchange rate and the one who brings decline in the manufacturing industry in the USA. So, he tries to impose 40% of tariff rate to raise the trade barrier to China. The more their tension is intensified, the more countries which are closely related with them will have harmful damage. Trump is also willing to eliminate undocumented immigrants and their families who are cheap laborers. Developing countries, for example, wouldn’t be able to boost their economic growth by means of trading and sending migrants to the rich country. So, they would need to move and change jobs to support their livelihoods. Moreover, employers in the USA also should pay higher wages and to provide better treatment to employees.