Why Trump, Boaster-in-Chief, really does have something to brag about
Trump has at last delivered; not only for the Republicans, the party of the hardening right that he loosely represents, but also for the American people
It is one of the great ironies of our time that the book that Donald Trump describes as “a work of fiction” is already widely available as a bootlegged version. With a couple of keystrokes, you can enjoy a fake copy of an entertaining if repetitive read.
Fire and Fury: Inside the Trump White House is number one on The New York Times bestseller list and it has only been out a week. It proves that the Trump brand sells, especially as the president threatened to sue. The book is indicative of the man – long of light gossip and short of hard substance, although the actions of this White House have proved its “revelations” to be unsurprising.
As the WikiLeaks papers showed, people in power like to gossip. When the hitherto private thoughts of the high and mighty are exposed to the cold light of dawn, they lose their mystery and are embarrassed to be seen as the hypocrites they are. But gossip is unimportant unless it reveals a change of policy or a palace coup. And Trump is in no danger of that – nor even impeachment.
For in the last two months he has delivered; not only for the Republicans, the party of the hardening right that he loosely represents, but also for the American people. The Boaster-in-Chief (so desperate for approval that he assumed credit for the safest civil aviation year on record) might just have something to crow about. The tax cuts that he drove through will add about US$1.5 trillion to the booming US economy. This compares to some US$4.5 trillion that the Fed put into a failed economy during the global financial crisis.
Economists believe the tax cut will push US growth up by another 0.5 – 1 per cent from its current 3 per cent annual rate. Trump is modestly saying that he will double it. Whatever the real figure, the agenda is to help Americans where it counts – in their pockets – hoping that the fat-cat business owners will follow up on their lip service to boost their workers’ pay packets.
Despite the fire and fury, Trump starts 2018 well positioned to make a strong case to the electorate in the midterm elections at the end of the year. His presidency remains strong and he will add more boasts that are not as fake as his opponents might hope. The stock market has soared, growth is high, unemployment remains very low, and job creation is strong, along with a small increase in wages. Fringe voters will be less worried because Obamacare was tamed, not destroyed. If he can follow it up with a bill to upgrade US infrastructure (tough for the Democrats to oppose), there may be no end to the boom.
But of course there will be an end, for on the other side of the balance sheet will still be a huge and rising US government budget deficit. That will be mirrored by a complacent private sector that will continue to borrow in the boom – but that story is for 2019.
Today’s business story is that Trump now has a lot less to worry about on the domestic front and will turn to global matters. If you scan the list of “what could go wrong in 2018?”, he figures in about seven out of every 10. Whether it is North Korea, the withdrawal of the US from the Middle East/Africa/South China Sea, the rise of China First, Jerusalem, Iran, or the environment; Trump policies snag every geopolitical and geo-economic trigger. The threat of IS to global stability has been replaced by the capriciousness of Donald Trump.
And one of the biggest of Damocles’ swords hangs over us in Hong Kong – for “America First” means trade protectionism. The raw numbers are that 25 per cent of Chinese exports go to the US (equivalent to 6 per cent of GDP); the US on the other hand sends just 5 per cent of its total exports to China (0.6 per cent of GDP). China sits in a very exposed glass house.
Trump’s big beautiful trade wall is designed to make the playing field more level and the outcome would be a lot worse for China than America. It will not be hard for a buoyant US economy to substitute imports even at higher prices.
The mathematics made a trade skirmish more likely, which will temporarily break up the equity party – but ironically may make this long bull market last even longer.
Richard Harris is a veteran investment manager, banker, writer and broadcaster and financial expert witness