For global economy, Trump victory intensifies uncertainties

Donald Trump’s promise to put America first helped propel him to the U.S. presidency. But he also unleashed uncertainty on the global economy by skewering trading partners and offering few specifics that might calm allies or businesses.

Financial markets reacted quickly and negatively to the unknowns of a Trump stewardship of the world’s largest economy. By Wednesday afternoon, though, stocks had rebounded, especially those involving drug companies, defense contractors and firms that rebuild infrastructure, which could benefit from a Trump administration.

Many analysts asked: Will — or can —Trump shed his aggressive rhetoric?

“We simply can’t know what type of president Trump will be,” said Paul Ashworth, chief U.S. economist for Capital Economics.

Trump had campaigned by vowing to rip up trade deals he deems unfavorable. He promised penalties for U.S. companies that offshore factory jobs. He would label China a currency manipulator. He would repeal President Barack Obama’s health care law.

He staked his credibility on erecting a wall along the Mexican border and limiting immigration — ideas that connected with a mainly white working class that’s felt abandoned by political leaders.

The president-elect has promised to spur growth with a roughly $6 billion tax cut over the next decade. It’s a policy that could help the U.S. economy but also cause its national debt to jump, according to economists. Trump also would use tax credits to fund infrastructure projects, saying he could deliver $1 trillion in investment over 10 years.

“Mr. Trump has proposed tax cuts and deregulation,” said Brian Wesbury, chief economist at First Trust Portfolios. “That’s not a bad start. We have never seen a tax cut we don’t appreciate.”

Analysts at Credit Suisse noted that Trump “will learn quickly the power of his new pulpit” as the markets respond to his pronouncements.

“This morning’s rally in infrastructure-related investments has demonstrated that the market will react to any specifics it hears,” analysts at the Swiss bank concluded.

Yet Trump has provided so few fleshed-out policy details that he fostered the impression of a White House that would be run largely on his instincts. For some investors and analysts, that approach has left a sense of unease about the possible direction of the U.S. economy under his watch.

Among other things, Trump has floated the idea of neglecting the national debt to negotiate for better terms. He argued that he can boost growth by cutting taxes for the wealthy, slashing regulations and reducing the country’s dependence on imports.

The flip side, according to the Committee for a Responsible Federal Budget, is that Trump’s plans would raise the national debt by $5.3 trillion over 10 years. This would be on top of the $9 trillion the national debt is already projected to rise by the Congressional Budget Office. The increase in debt risks making it more expensive for the United States to borrow.

Trump has insisted the U.S. economy can grow nearly 4 percent a year — roughly double its current pace. The Federal Reserve has estimated that growth will average below 2 percent. [During his campaign, Trump attacked the U.S. central bank as a pawn of Obama.]