Your Wallet Under a Trump Presidency

With Trump entering the Oval Office things are certainly about to change, but it’s not yet clear what those changes will be - and what those changes will mean for us and our economy. Is America about to close itself off to the world? Or is it be business as usual for the Republicans?

While his opponents have claimed that he has no real plans his supporters have been promised everything they could want, and the markets have been defiantly optimistic. So what can we say about his policies at a glance and what does it mean for the money savvy people on the street?

Trumponomics at a glance

Trump is likely to run a pro-business administration. This means rather than leaving businesses to fend for themselves in the international market they will benefit from favorable domestic policies and lower tax rates. In short, American businesses will be rewarded for operating in the USA, and potentially punished for not doing so. Already Ford and Softbank’s shares increased in value when they committed to investing and manufacturing in the USA.

Some of Trump’s nominees for the cabinet have a history of protecting the interests of business against allegations of fraud and environmental damage – meaning some large corporations could be about to be given a lot of freedom to operate.

One of the most contentious points of Trump’s coming tenure is his promises of protectionism. One possibility is that Trump will leave the World Trade Organization so that he’s able to impose higher taxes on imports from foreign countries. On the other end of the spectrum is the possibility of a balancing act in the form of lower direct taxes to Americans.

Spending trumps taxes

Trump has $6.2 trillion dollars worth of cuts planned. Earlier in his campaign he promised to lower corporation income tax to 15% and is planning to restructure parts of the tax code for businesses to be more flexible.

Changes for individuals will be far more modest with little in store for middle-income earner, with the average person saving $500 a year in income tax.

The economy that can’t be stopped

Now for the bit that’s gained the most coverages, and that many economists are getting excited about: getting the global economy pumping again - at least short term. Trump is planning on spending up to $1 trillion on US infrastructure, which by most accounts is a huge stimulus in a time of relative stability. And like any stimulus this should lead to growth.

This $1 trillion has to come from somewhere though, and based on Trump’s somewhat controversial history of strategic bankruptcy in his own businesses he’s not a man too concerned about running up a deficit.

The bright side for you

Some economists reject the idea the deficits are particularly bad for a country to have, especially when that country has control over the US dollar. They predict in the short term, at least, things might be good for many Americans.

Interest rates may go up which is fantastic for savers and healthy growth of the economy is rarely a bad thing for investors. In addition, lower taxes and potentially a boom for your business or career are always welcome.

What to watch out for

Depending on who you listen to, there’s potentially a lot to watch out for. With the scrapping of mortgage interest deductions housing prices are likely to go down while mortgage rates will go up with interest rates, which isn’t great news for those looking to get on the property ladder or with real estate investments.This could also harm the return on some bonds.

Protectionist policies could see consumer goods rise in cost while import businesses suffer. Meanwhile the stimulus could struggle with a squeeze on immigration hurting the construction industry, and without increased productivity and much of the growth going to the already rich. Taking this into account, the awaited economic boom might not be so loud.
At the moment some of Trump policies are downright contradictory and if you’re financially vulnerable or reliant on the Affordable Care Act you might need to keep some money aside. For investors using online brokers like CMC Markets with things up in the air long stocks might not be the safest option, and growth in the US dollar might be short lived. While it’s a time of uncertainty, let’s hope that the positive projections of an economy under Trump turn out to be true.