The American president will have left his mark on the American economy: massive tax cuts, trade war with China, banking and environmental deregulation ... For what results?
Before the COVID-19 crisis reshuffles the cards, Donald Trump was preparing to campaign on his economic record, according to him "the best of all time".
What about the facts? How has the economic situation evolved during his tenure and to what extent is this development directly linked to the policy led by the tenant of the White House?
2016: an economy already growing
In November 2016, the US economy, shaken by the 2008 subprime crisis, had recovered sharply. The economic recovery had reduced unemployment to a rate of 4.7% and GDP per capita (in constant dollars) was more than 5% above its pre-crisis level.
The 2016 election therefore took place in a favorable economic context. However, Donald Trump did not hesitate to argue the opposite during his campaign and after his arrival at the White House. Objective: to be given the benefit of any improvement in the situation.
2016-2019: From campaign promises to action
Donald Trump fulfilled many of his 2016 campaign promises. The country's economic situation at the end of 2019 cannot, however, be directly attributed to this policy, given the time required for the implementation of the measures and the appearance of their effects. .
Candidate Trump had pledged massive tax cuts and major investments in infrastructure. The tax cuts were approved by an agreement with Congress at the end of 2017. They benefit all taxable households almost in proportion to income, so that the average tax drops by 8%. Corporate tax is lowered from 35% to 21%, lower than the average rate in OECD countries. The agreement on the renovation of infrastructure was only reached in the second quarter of 2019: it is $ 2 trillion in additional spending over ten years that are planned.
Strained international relations
In terms of international trade, Donald Trump had clearly expressed during the campaign his distrust of free trade and several international agreements that he considered unfavorable to the interests of the United States in terms of manufacturing jobs (relocations) and deficit. commercial.
Candidate Trump therefore pledged to renegotiate or denounce them, which he did immediately after arriving at the White House by withdrawing the United States from the Trans-Pacific Free Trade Agreement. The Free Trade Agreement between the United States, Canada and Mexico (NAFTA) was renegotiated and enacted at the end of 2019.
In order to rebalance bilateral trade relations in favor of the United States, Donald Trump has used the tariff increase as a means of pressure. He imposed or threatened many countries during his tenure. This was particularly the case with Mexico, Canada, Turkey, Europe and of course China, which he considers to be the main commercial and technological adversary of his country and which he accuses of dumping by subsidizing. its imports or by manipulating the price of its currency to increase its competitiveness. The signing of an agreement between Washington and Beijing in early 2020 seems to temporarily suspend the conflict even if the US president continues to attack Huawei, TikTok and WeChat, this time using the legal weapon.
Despite the increases in spending and decreases in revenue that he was forecasting, candidate Trump promised in 2016 a total disappearance of federal public debt within eight years to satisfy part of the electorate and, especially, the party. Republican, attached to budgetary orthodoxy. To reconcile a priori contradictory promises, he envisioned a “penny plan” consisting in reducing by 1% per year all federal spending except defense and health.
But these spending cuts were abandoned and the fiscal policy implemented resulted in a sharp increase in the federal public debt, which reached $ 23,201 billion at the end of 2019 against $ 19,977 billion at the end of 2016.
Despite these protectionist measures, the United States' trade deficit continued to widen during the first two years of Donald Trump's tenure, from $ 502 billion in 2016 to $ 621 billion in 2018. It narrowed slightly in 2019 ( 617 billion) due to a significant drop in Chinese imports but also at the cost of a sharp decrease in US exports.
Banking, energy and environmental deregulation
In other areas, including banking, energy and the environment, Donald Trump's 2016 program promoted deregulation resulting in the abandonment of measures adopted under the presidency of Barack Obama in order, according to him, to free economic growth from the brakes they would constitute.
For example, the Dodd-Frank Act, adopted in the wake of the subprime crisis to improve financial stability, was immediately repealed with the aim of increasing the capacity of banks to lend to the economy.
Just as quickly, Donald Trump reconsidered the pro-environmental measures taken by the Obama administration, then withdrew his country from the Paris agreements. Climato-skeptic asserted, Donald Trump displays strong support for the fossil fuel sector. With its support, the United States confirmed in 2019 its position as the world's leading oil producer, ahead of Saudi Arabia, thanks to shale oils.
From an outline of public health to a return to private health
In terms of health policy, Donald Trump clearly shows his desire to dismantle the Affordable Care Act, says Obamacare, throughout his 2016 campaign. He denounces both the cost of this device and its compulsory nature. In 2018, the law was emptied of part of its substance, Americans implicitly no longer having the legal obligation to insure.
In December 2018, a Texas federal judge ruled that removing this requirement made Obamacare unconstitutional. In the midst of a pandemic, the future of the device is now in the hands of the Supreme Court, even though Donald Trump has just appointed the very conservative Amy Coney Barrett there following the death of the progressive Ruth Bader Ginsburg.
The US economy in 2019
Keeping most of his campaign promises, Donald Trump continued to revive activity in a country that was already in a very favorable situation ... at the risk of an overheating economy.
Apart from abysmal public debt and a considerable trade deficit, the US economy seemed to be looking good at the end of 2019: a labor market at full employment with an unemployment rate of 3.5%, a share of households below the poverty line which reached its lowest historical level (10.5% at the federal level). The poverty rate for ethnic minorities is also declining but remains very high for African Americans (19%) and Hispanics (16%). But inequalities, especially those related to racial affiliation, are on the rise.
The good economic results observed in 2019 are only partially linked to the policy of Donald Trump insofar as the previous indicators have only continued a trend acquired under Barack Obama. On the other hand, the new fiscal policy, due to its non-redistributive nature, may explain the continued rise in inequalities.
Some of the president's decisions have also proved to be a double-edged sword for the US economy. The Sino-US trade war had the dual objective of rebalancing the trade relations of the two countries and "bringing" manufacturing jobs back to US soil in the medium and long term. However, the escalation in the rise in tariffs between the two countries since 2018 has had perverse effects in the short term. The US agri-food sector has been directly affected by the rise in tariffs imposed in retaliation by China. In 2017, 57% of soybeans produced in the United States were exported to China for an amount of $ 13.9 billion, corresponding to 10% of American exports to this country. As tariff hikes led to the collapse of Chinese purchases, that amount fell to $ 3 billion in 2018.
The rise in customs duties also affects the activities of importers of Chinese products, in particular in the clothing and electronics sector, and threatens in particular small retailers, some of which have been forced to increase their selling prices. or reduce their range. The economic and health situation in 2020 unfortunately makes it impossible to judge the expected effects on manufacturing employment that were supposed to offset these drawbacks.
A game-changing pandemic
The economic record of the Trump years, whether or not it resulted from his policies, is therefore not without ambiguity. However, the COVID-19 epidemic has erased most of what could be considered its best results, with in particular a spectacular rise in unemployment which reached 14.7% in May 2020 before falling to 7.9% in September. , but with a sharp rise in inactivity. This unemployment rate, high for the United States, necessarily modifies the appreciation of American voters, who will also judge the chaotic management of the health crisis by the president.
Beyond his record, the tone of Donald Trump's speech has contributed to increasing the existing divisions within American society. It is therefore an America more fractured than ever which is already voting by mail or in advance in the presidential election on November 3.