Donald Trump closes his term to give command to already president-elect Joe Biden. Trump relied on economic arguments in his reelection bid but, curiously, if we talk about the economy, he has favored the Democrat Joe Biden because it won in counties that represent 70% of the country’s GDP.
Leaving aside Trump’s eccentricities, after the end of his term it is necessary to assess whether, with his policies, the US economy has improved or not, since his arrival promised disruption against the policies of his democratic predecessor, Barack Obama.
In order to correctly assess the results of its policies, we will see where the U.S. economy was and their main economic indicators at the beginning of their mandate and at what point they have ended. Of course, we must take into account the reality of the pandemic and that it has significantly distorted the indicators and that this could alter the management analysis.
The economy in Trump’s hands
If we put it in context, after the Democratic Obama administration, we saw a slowdown trend in the economy. If in 2015 the economy grew at a rate of 2.9%, in 2016 it was made up of 1.6%. This trend was reversed after the entry of the Trump administration. In 2017 it achieved a growth of 2.4%, in the next it accelerated to 2.9% and in 2019 it remained at 2.3%.
There is some merit that the US economy could accelerate in a context of rising interest rates which lasted until September 2019. Even, GDP growth rate peaked at 3.9% in the last quarter of 2017. But until 2019, the average growth rate was 2.5%, in line with the trend it inherited.
Part of this growth should be allocated to a especially expansionary fiscal policy that has impacted on the public deficit. During his mandate, the federal deficit has been continuously increased and Trump has put U.S. government debt on its peak trajectory since World War II. But discounting the effect of the coronavirus, the massive tax cuts approved by Congress in 2017 were already adding hundreds of billions of dollars to the deficit.
If we look only at the US federal debt, it would reach 98% of GDP in fiscal year 2020 in September, while in 2019 it was at 79% and when it entered the White House it was at 70%. Almost 30 points of debt over GDP in just four years.
In the year of the pandemic, short-term spending has been promoted that the deficit amounts to 3.3 trillion dollars this year alone, which translates into 16% of GDP. This year’s deficit exceeds all previous annual deficits since 1945.
Returning to GDP growth, in 2020, the United States would close with a GDP drop of 4.3% as a result of the pandemic. It is a terrible figure compared to the historical comparison but the truth is that has had a better performance within compared to developed countries that would have seen a contraction of 5.8%.
The labor market reached its best rate in five decades before the coronavirus
If we examine the labor market, the unemployment figure reached 6.7% in December, while when Trump arrived in 2017 it was 4.8%.
The coronavirus and the slowdown in the economy led to unemployment of 14.7% in April, the highest level since the Great Depression of the 1930s. Now, we find an unemployment rate that is now basically the same place before Barack Obama took office in the middle of a financial crisis.
However, without the coronavirus effect, the truth is that magnificent results were achieved. In 2019, the unemployment rate reached 3.5%, the lowest rate in five decades. And in the period 2016-2019, the economy added more than 7 million jobs, far exceeding the forecast of 1.9 million for his term.
It’s important pointing that the unemployment rate for many historically disadvantaged groups has also reached record lows. The unemployment rate for African Americans has reached the lowest level on record, and historical lows have also been reached for Asians, Hispanics, American Indians or Alaska Natives, veterans, the untitled secondary education and people with disabilities, among others.
Full employment has been one of the assets for poverty reduction, with an unprecedented level of reduction. If we focus on the period 2016-2019, 6.6 million people were lifted out of poverty, the largest reduction in 3 years after starting a presidency since 1964.
The trade war mistake
We might think that the good labor market data is due to the protectionist policy of the United States aimed at China to praise its national manufacturing industry. However, the results have been very modest in terms of increased employment in the United States.
In March 2010 (the lowest point after the 2008-2009 crisis), manufacturing employment reached 11.453 million people and when Trump came to power in February 2017, this figure had risen to 12.38 million and rose to 12.83 million in March 2020. In other words, about 400,000 new jobs appeared in the manufacturing sector under Trump by spring 2020 (for nearly four years).
Since taking office, Trump has unilaterally imposed numerous tariffs new on steel, aluminum and a variety of products from China, putting upward pressure on prices in the United States. Based on 2019 import levels, US and retaliatory tariffs currently affect more than 460,000 million imports and exports.
Its tariffs have supposed annual costs for the consumer in approximately $ 57 billion annually, which has been a mistake that the Americans have paid.
As a positive point, in the last stage of Trump, positions with China and tariffs were lowered as part of the “phase one” trade deal with China. In this agreement, Trump reduced the tariffs previously imposed on September 1, 2019, from 15% to 7.5% on 120,000 million dollars, suspended the 15% tariffs that were scheduled to take effect on December 15, 2019 and indefinitely suspended the increase in the third tranche of tariffs from 25 to 30%.
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