Macroeconomist on Trump's Economic Agenda: 'More Show or Substance?'

Dec 13, 2016

President-elect Donald Trump has upended many typical Washington conventions during the campaign and more recently, in his transition period. From international relations to science and environmental policy, predicting exactly what the Trump Presidency will look like is a challenging task.

That’s especially true when it comes to economic forecasting. But experienced economists say they’re able to extrapolate some details. Gus Faucher, Senior Vice President and Senior Macroeconomist for PNC Financial Services based in Pittsburgh, says that Trump has the potential to bring about unprecedented economic change.

"We have a president-elect who has kind of uprooted a lot of basics we’ve had for economic policy - particularly in terms of trade, particularly in terms of immigration," he says. "So I think we could see some of the biggest changes in economic policy in the post-WWII era."

Faucher notes that in some respects Trump has also run against the traditional Republican policies in trade and infrastructure spending. Depending on how Congress responds to Trump's economic policies, inflation could rise.

"Inflation has been very low for the past few years...but if we get more aggressive fiscal policy, tax cuts, more federal spending, the job market is tight and if it gets even tighter then we could see stronger inflation - less so in 2017, more so in 2018," he explains.

One of Donald Trump's key campaign platforms targeted towards middle class American workers was reforming trade, but whether it was "more show or more substance" has yet to be seen, according to Faucher.

"From an overall economic perspective I think that free trade is generally better for the US economy, although there are people who are hurt by it. So I would like to see fewer trade restrictions, but it's a question of how much does Trump honestly believe in this," he explains. "[Trump's] been all over the place on a lot of these issues...so I think that it's still a very open question at this point."

As Trump's first 100 days draws closer, Faucher notes three major categories to follow:

  • Changes in taxes and where those changes are oriented to
  • Trade restrictions and the potential implications on prices and overseas retaliation
  • Immigration

"Immigration is a key source of long-run economic growth in the United States. So if we see a significant reduction in immigration levels into the U.S. that could raise concerns," he says.