For the outside world, a key question is just how much the United States will turn inward given the tone of the campaign and in the wake of the UK’s vote to leave the European Union.
- A Hillary Clinton presidency would offer the greatest continuity with current economic policy as she presses a largely standard Democratic Party agenda that includes more public spending on infrastructure and education, higher minimum wages and corporate-tax reform. All else being equal, growth forecasts for the US economy would change very little under her.
- Donald Trump’s economic agenda ostensibly embraces traditional Republican tenets of broad tax reductions and repealing President Barack Obama’s healthcare reforms. But his mercantilist trade policy and anti-immigration rhetoric represent a departure from mainstream Republicanism. This combination leaves the likely impact of Trump’s policies on US growth unclear, but the threat of a trade war with China or Mexico could unsettle financial markets substantially and generate significant immediate headwinds to global growth.
- Clinton and Trump have made commitments to fiscal responsibility, but neither seems prepared to put balancing the budget ahead of other priorities. Any significant fiscal reforms will face challenges from what is likely to be a divided Congress, although Clinton may have a slightly easier time in this regard than Obama if her victory boosts the number of Democratic seats. Trump’s proposed large tax cuts are unlikely to pass in Congress, but he might be able to patch together a coalition of members from both parties to support modest change. In any case, the next president and Congress will face the immediate challenge of raising the debt ceiling, which has been suspended until March 2017.
- Neither candidate offers compelling ideas on addressing the root causes of slower growth or the looming challenge of reforming US entitlement programmes. Surprisingly, in a campaign filled with concerns about inequality and unfairness, Clinton’s proposals are mainly incremental reforms while Trump focuses almost entirely on the perceived evils of trade.
- For the outside world, a key question is just how much the United States will turn inward given the tone of the campaign and in the wake of the UK’s vote to leave the European Union. At the very least, progress on trade faces delay if Clinton seeks changes to the Trans-Pacific Partnership or an indefinite interruption if Trump delivers on even some of his threats against trading partners. While Trump claimed the British referendum results as an affirmation of his call to assert control over immigration and trade, the actual impact on the US campaign will depend on whether the UK has set itself a promising economic and political course come November. Meanwhile, Trump’s rhetorical style would also make economic summits like the G20 less cooperative and likely leave global leaders hamstrung in any coordinated response to renewed global financial instability.