Going The Wrong Way: Why Trump’s America Is Still Not So Great

Despite the US Department of Trade and Commerce reported solid growth of GDP by 3.2 % by the first quarter of 2019, many experts do not believe in the glorious future of North America. Trump’s yesterday’s inspiring promises break on today’s real risk of a sharp economic downfall.

What do statistics say?

Although Bloomberg predicted the USA economic growth only by 2.3%, America managed to go beyond this figure, mainly due to the growth of goods reserve and the reduction of the foreign trade deficit. In other words, America has increased net exports. But the actual state of things is not so bright.

Some essential components of the USA GDP like consumer demand and foreign investments demonstrated very weak dynamics.

For instance, according to the US Bureau of Economic Analysis, consumer activity in the first quarter of 2019 grew by only 1.2% against a 2.5% increase in the fourth quarter of the previous year, and the demand for durable products dropped by 5.3% against an increase of 3.6%.

The situation with private investments is also distressing: it was only 1.5% against a 3.1% increase in the last quarter of 2018.

In April of this year, International Monetary Fund made a forecast that the USA GDP would decline to 2.3% in 2019 and even fall to heartbreaking 1.9% by 2020, while experts from
the Federal Reserve System are even more pessimistic than their colleagues from IMF because their economic growth forecast for this year is only 2.1%, and for the next one is just 1.9%

Such a gloomy performance of the American economy is very strange and even abnormal if to take into account the tax reform law endorsed by Trump in December 2017. This tax involved policies for easing the tax burden for different taxpayers, namely, for corporations and large enterprises.

Why so bad?

Gregory Daco, head of the research group of the National Association for Business Economics (NABE), says that the slowdown of the global economic growth and trade wars are the culprits of America’s negative economic performance.

While the governments of the USA, China, Mexico, Canada, and the EU are persistently exchanging mutual customs duties, American export is rapidly declining while the trade deficit is continually increasing. According to official data, by the end of the previous year, the USA trade gap hit an all-time record of $891.3 billion where over $400 billion was the trade deficit with China. As you remember, the reduction of foreign trade deficit was Trump’s main election pledge.

As a result, trade wars cost America whopping $8 billion or 0.04% of GDP, if to believe the National Bureau of Economic Research.

Economists warn that the US foreign trade deficit will remain that high, regardless of whether the United States and China will conclude a trade deal in the near future. Negotiations between Washington and China to resolve an ongoing trade clash do not bring any positive results.

At the same time, Trump’s administration is also drawn in a trade conflict with the European Union. America is currently considering imposing new custom duties on goods from Europe including wines, cheeses, olives, and more. Such a fierce trade policy from the USA side towards the EU is explained that the European Union is financing Airbus.

Forbes analysts warn that America’s endless trade wars on the background of declining GDP and low interest rates may indicate only one thing – the beginning of an economic recession.