US: Trumponomics postponed further – Danske Bank

Research Team at Danske Bank have become more pessimistic on the outlook for Trumponomics in recent weeks.

Key Quotes

“Changes to US economic policy are likely to come later and be smaller than previously expected due to the chaos within the Republican Party. Although replacing Obamacare has been very high on the agenda for both President Trump and the House Speaker Paul Ryan, the process has dragged on and it has begun to look like a crucial blow for the Republicans, as the moderate and more conservative Republicans are fighting each other about how to proceed.”

“Last weekend White House budget director Mick Mulvaney said that Trump’s full budget will be released in mid-May, which, in our view, raises questions about whether the Treasury Secretary has enough time to reach a deal on a tax reform before Congress’s August recess. We have argued for a long time that it will take time to pass changes to economic policy, meaning that the biggest real growth impact would be in 2018 due to policy lags. With this new information, we think a deal on a tax reform is more likely to be reached in late Q3 17 or even Q4 17, meaning the real growth impact would be in Q2 18 at the earliest, in our view. That said, the Fed has clearly indicated that it wants to offset more expansionary fiscal policy, although it welcomes reforms that increase productivity growth.”