According to Bloomberg News, Trump may have a $300M conflict of interest with Deutsche Bank, as his company is attempting to restructure debt it owes the bank, and Trump’s new attorney general will inherit a case that could result in a possible multi-billion dollar penalty to the bank related to mortgage-bond investigations. Unsurprisingly, Deutsche Bank released a report forecasting Trump’s policies ushering in a new age of economic growth that could serve as a global template, but despite the potential conflict of interest it makes some interesting points. It argues the growth would stem from the rollback of growth-stifling regulations, the cutting of taxes and a significant amount of infrastructure spending, including improvements to bridges, roads and other public projects.
In the short run, these policies could definitely result in increased growth. If Trump is able to pass a significant infrastructure spending bill through a Republican, deficit-wary Congress, it would mean people will be back to work in gainful full time employment, raising discretionary spending which has been proven to give a jump start to economies in the past. It would make transport easier and smoother, improving efficiency and lowering the cost of transporting and providing goods, which helps keep costs low for consumers – again, leaving more money for discretionary spending to boost the economy.
The cutting back of taxes gives corporations more money to invest into their employees and the economy – whether it is used for that or dividends to investors/bonuses to CEOs is another question, but theoretically companies will have more money to invest. The cutting back of regulations removes barriers to entry so new businesses can enter the economy, which in theory could result in more jobs. Again, at what cost to the consumer that will result in is another question, but theoretically it could result in more businesses popping up.
The analysis makes the case that, “While Trump introduces higher uncertainty, this is better than a near certainty of the continuation of a mediocre status quo.” It forecasts gross domestic product (GDP) growth to increase to 2.4% for 2017, and 2018 approaching 3.6%. GDP growth has averaged 1.6% under Barack Obama – Obama being the only president since Herbert Hoover to not experience growth of at least 3% during his time in office. Deutsche Bank noted that increasing GDP in America leads to growth around the world, pushing it’s 2017 forecast to 3.4% - up from previous estimate of 3% (what they predicted it would grow under Hillary Clinton).
The report assumes the softening of Trumps proposed isolationist policies, as a trade war would have a significant impact on both GDP and the prices of products on our shelves. This along with the uncertainty of Trump’s ability to enact his proposed agenda pose the biggest threats, within Trump’s control, to the economy succeeding under his watch. External threats largely outside his direct control include other geopolitical risks (wars in the Middle East, financial crises in Europe), instability in China, possible trade wars between other nations, the Fed raising interest rates too quickly, and crises in other emerging markets.