Trump vic­tory fu­els surge in con­fi­dence

Now, poli­cies must live up to ex­pec­ta­tions of growth

Albuquerque Journal - - BUSINESS - BY LAUREN VILLAGRAN JOUR­NAL STAFF WRITER

Trump won. Con­sumer and small-busi­ness con­fi­dence surged. Now what?

The op­ti­mism sparked by the elec­tion of Pres­i­dent Don­ald Trump could be­come a self­ful­fill­ing prophecy that stokes eco­nomic growth, ac­cord­ing to Wells Fargo se­nior econ­o­mist Eu­ge­nio Alemán. On the flip side, he said: The gov­ern­ment must now make eco­nomic pol­icy that jus­ti­fies that op­ti­mism.

“When peo­ple feel bet­ter, they bor­row, they spend, they in­vest,” Alemán told those at­tend­ing New Mex­ico State Univer­sity’s Eco­nomic Out­look Con­fer­ence on Thurs­day. “Since the elec­tion, con­sumer con­fi­dence sky­rock­eted. Con­sumers are happy.”

Stag­nant con­fi­dence lev­els were keep­ing the U.S. econ­omy from grow­ing faster, he said.

But he added, “Un­less we do some­thing with th­ese con­fi­dence in­creases, and we put money be­hind this con­fi­dence, noth­ing will hap­pen in the econ­omy.”

The new ad­min­is­tra­tion also brings with it big risks to the econ­omy, not the least of which is Trump’s po­si­tion on trade with Mex­ico.

It’s an area of risk that could hurt New Mex­ico es­pe­cially hard. The state more than dou­bled its ex­ports to Mex­ico in two years to more than $1.5 bil­lion in 2015, and busi­ness ac­tiv­ity at the Santa Teresa bor­der in­dus­trial com­plex has been a bright spot in the state’s lag­ging econ­omy.

Trump has of­ten cited the U.S. trade deficit with Mex­ico as an ex­am­ple of unfair trade pol­icy, and he has in­sisted that NAFTA, the agree­ment that un­der­pins more than $530 bil­lion in an­nual U.S.-Mex­ico trade, should be rene­go­ti­ated. He has said he be­lieves the U.S. can get a bet­ter deal.

“I think this is the big­gest risk of this ad­min­is­tra­tion: trade and the is­sues with Mex­ico,” Alemán said.

The U.S. has a $60 bil­lion trade deficit with Mex­ico and an al­most in­com­pa­ra­ble $320 bil­lion trade deficit with China, he said. But look at the deficit with Mex­ico by sec­tors of the econ­omy, and a more nu­anced pic­ture emerges.

“The U.S. has 56 sec­tors of trade with a sur­plus, and in 42 sec­tors of trade, Mex­ico has a sur­plus,” he said. “If you look at the sec­tors, we ex­port $70 bil­lion in au­toparts to Mex­ico. And we im­port $80 bil­lion in au­to­mo­biles from Mex­ico.”

The trade re­la­tion­ship is sym­bi­otic.

“If we hurt Mex­ico,” he said, “we’re go­ing to hurt our­selves.”

Alemán fore­casts 2.2 per­cent GDP growth in 2017 and 2.4 per­cent growth in 2018.

ANDRES LEIGHTON/FOR THE ALBUQUERQUE JOUR­NAL

A Union Pa­cific train rolls past Twin Cities Ser­vices Inc. in Santa Teresa in south­ern New Mex­ico. A Wells Fargo econ­o­mist said Thurs­day that Trump’s po­si­tion on trade with Mex­ico en­dan­gers the econ­omy.

Eu­ge­nio Alemán

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