Any time a new president is elected, the markets react cautiously. With the election of Donald Trump, experts were even more uncertain about the future of exports and other economic measurements. During the election, Trump made it clear that he would be renegotiating trade deals and working to put the interest of U.S. businesses first. Many worried that this aggressive approach would cause friction that with traditionally friendly trade partners. Actual growth numbers for U.S. exports have been better than anticipated, but experts don’t expect to see significant improvements in 2018.
The Good News
While exports aren’t expected to experience a boon in 2018, there is some good news that is worth noting:
- The U.S. dollar is weaker than usual, which means that companies are investing money in creating more output that can be exported to foreign companies. This is the perfect time for export businesses to expand because U.S. products now cost less in other markets, which means that sales are up over all.
- Europe is becoming an increasingly large market for American products.
- Economies around the globe are experiencing the best growth since the Great recession, which most argue ended in 2009.
Despite positive momentum in several key areas, other major producers are also increasing their exports. China, Japan and Brazil are also expanding their efforts and sending more products to the U.S. Automobiles, computers and telecommunication equipment are the leading imports to the U.S. As a result, the trade gap is expected to increase with more imports coming into America than ever before. In 2016, the trade deficit was $504 million and that number is expected to rise in both 2017 and 2018.
President Trump has promised to close the trade deficit, but to date, there haven’t actually been any new policies enacted that would make any major moves towards addressing trade imbalances with other countries. While he has threatened to pull out of certain trade agreements and talked a lot about China taking advantage of the U.S., all agreements are still in place.
How tax reform could affect exports
That being said, the Republican tax reform bill, which could pass at any moment, has the most potential to affect trade in the coming year. While there is no way to know exactly how certain tax cuts will affect exports and imports in the long-term, many are skeptical about whether proposed tax cuts will actually increase the deficit. While the details of the plan can be complicated, the plan is looking to both cut federal revenue and reduce the trade deficit. Many see these two goals as inherently contradictory. According to the most pessimistic predictions, the deficit would actually increase by 16% under the new plan.
As it stands, exports are expected to hold fairly steady and experience a slight growth in 2018, but the new tax plan may throw a wrench in those previous predictions. If nothing else, the economy is currently on the right track and consumers all over the world are buying more American products and becoming friendlier to U.S. imports. While the future may seem uncertain, it is safe to assume that global trade will continue to increase as the world becomes more interconnected.