Goldman Sachs, the reputed and leading global investment banking corporation has warned that the economic boost promised during the election campaigns of Donald Trump may not be realized in the near future. The stock market was already having a tough time as it struggles to maintain a positive outlook of the economy. Immediately after the announcement of the election results, the stock market enjoyed a boom as the DOW average shot beyond 20,000. Within two weeks of acting as the President of the USA, Donald Trump has managed to increase political and economic risks.
Goldman Sachs gave a clear assessment of Trump’s policies in a note sent to its clients on Friday. Trump’s White House is set to face bipartisan political resistance for the administrative initiatives. The corporation commented that the risks are positively tilted in the present situation. Even the members of the Republican party have divided opinions on the immigration ban and financial reform outlook. Investors boosted the stock value in the later part of last year, but they now worry about the economic implications of the travel ban.
Trump has promised fiscal boost immediately after taking over the White House administration. However, it is the least of the worries of the White House now. The Republican party was keen on repealing Obamacare, but now, the party members are getting increasingly nervous. Their plan on bringing about a better and cheaper insurance plan is not materializing amidst support for Affordable Care Act. Also, the administration has to take care of the implications of travel ban which will consume a lot of political capital. All this points to the fact that the fiscal boost will be pushed to 2018.
Senator Orrin Hatch expressed his dissatisfaction on the proposed broad tax reforms. Border adjustment tax is also not welcomed by several members of the Republican party. Goldman Sachs points out that the Trump administration will focus on trade and immigration promises of the election campaign. This can be disruptive for the economy as there are potential risks for the USA as well. Goldman Sachs predicts that the economy fiscal boost will be around 1% through tax cuts. However, it is skeptical of the tax reforms promised earlier. The bank also predicts an increase on import tariffs and decreased scope for immigration.
The immigration restrictions are severely condemned by the tech companies and legal action is being taken. Banning immigrants can add stress to the labor market and it will affect the productivity. There is a huge risk to corporate profits due to this controversial travel ban. The trade restrictions also add to the financial burden of the companies. If the trading partners retaliate, the negative consequences will affect the economy greatly.
Trump initially had the potential to win the Democratic votes for his infrastructure rebuilding initiative. However, as his administration now focuses on travel ban and repealing Obamacare, it will only lead to more uncertainty in the political condition. With more political and economical risks, the Trump administration will not have enough time and capital this year to boost growth.