Trump victory fuels surge in confidence
Now, policies must live up to expectations of growth
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.