Question

When Donald Trump ran for presidential election in 2016, he promised to rebuild the US infrastructure to make America great again. He also promised to cut taxes to foster a better business environment. At the same time, he blamed other economies for the US’s large amount of trade deficits and vowed to eliminate such deficits. From an economic point of view (forget the underlying politics), would you think he can achieve what he promised to do? Why and why not?

Answer 1

The United States of America is undoubtedly the world’s leader when it comes to developed countries across the globe. Its currency is widely accepted for international trade and the major reason for the same is the scale of operations in the country. The GDP growth of the country is even bigger than the total GDP of most countries in Asia. However still active management is required as Trump suggested.

In my opinion, indeed the United States can achieve what Trump has promised to do. Over the years, the American people have lost most of their jobs to outsourcing in countries such as China and India, where the labour force happens to be extremely cheap.

On the contrary, China and India are two countries which have always imposed very high tariffs on American imported goods such as vehicles, phone equipment etc. As Trump administration aims to reduce trade deficits by imposing retrospective taxes, countries such as India and China would need to implement free trade practices at their end also.

Further, from an economic standpoint if the government is able to retain jobs in the country as well as allow tax cuts to take place, it would case a double help effect wherein the demand for products and services would be created due to creation of new jobs on one hand, and on the other low cost borrowings would further increase supplies for business.

Therefore, in my opinion Trumps proposals to revive the economy in a condition where other countries have so high tax levels is correct and as a matter of fact should have been implemented way earlier. Countries cannot continue to steal our jobs and enjoy tax reliefs while they continue to charge us exorbitant rates for our products and services. Disallowing, recognizing and taking corrective measures is important and is economically the best thing to do as the Trump administration currently is doing.

Please feel free to ask your doubts in the comments section if any.