Fleet Management

Analysis: The Uncertainty of a New President

December 2016, TruckingInfo.com - Editorial

by Evan Lockridge, Business Contributing Editor - Also by this author

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Source: Bureau of Transportation Statistics
Source: Bureau of Transportation Statistics

After an uncertain first half of the year in which economic growth and trucking slowed, leaving many wondering where things were headed, we finally got the economic news that we had been hoping for with third-quarter GDP. But no sooner were we breathing sighs of relief, everything becomes uncertain…again.

Government numbers released in October show the U.S. economy put on its best show so far in 2016, with the gross domestic product expanding at an annual pace of 2.9% during the third quarter. This is far better than the rate of barely more than 1% in the first half of the year and was even better than many analysts were expecting. Then November happened…

Specifically, the election of Donald J. Trump as the 45th president of the United States. Amid reactions ranging from great joy to deep anger, there was also a return to uneasiness about what his administration means to the economy.

For starters, don’t expect an immediate, significant effect, either positive or negative, when Trump takes office in January, according to analysis from FTR. Part of the reason is he “has little experience in quickly moving legislation through a skeptical (Republican) and hostile (Democratic) Congress.”

FTR analysts believe a Trump presidency will have little effect for much of next year, with the federal budget already in place and policies set until late in 2017. However, after that things could get interesting.

During this time, Trump, his advisors, and the Republican-controlled Congress will be looking at changing policies and regulations and passing new laws that could have a big long-term economic effect. Two of the areas most likely to affect trucking are infrastructure and trade.

Trump has said he wants to make infrastructure improvement a priority in his first 100 days in office. There’s little argument that our country’s infrastructure needs work, and this type of investment is something even others on the other side of the political aisle have pushed for in the past. He said he wants a “deficit-neutral plan,” and has proposed spending $1 trillion over a decade, but the president-elect also promised to cut taxes to the tune of $4 trillion over 10 years. Where is the infrastructure money going to come from? So far Trump has proposed tax breaks for private investors to build toll roads and bridges. But that’s unlikely to do much to fix our existing roads and bridges.

When it comes to trade, one of the underpinnings of Trump’s plan to “make America great again” are promises to make big changes in how we deal with Mexico and China, in the belief he can return U.S. manufacturing jobs that have gone overseas. While he can alter trade agreements unilaterally to some extent, that could start a trade war, resulting in big price hikes for foreign produced goods, which could, in turn, lead to consumers closing their wallets.

Worst case scenario is these countries could retaliate with their own tariffs, prompting a full-scale trade war. That, said the Peterson Institute, could lead to a recession, pushing unemployment back to 8.6% from the 4.9% reported in October and costing some 4 million U.S. jobs by 2019.

The possibility of such heavy-handed tactics no doubt concerns the American Trucking Associations. In laying out the group’s agenda in October, ATA President Chris Spear said the group planned to promote international trade agreements. He noted trucks move some 70% of the freight between the U.S. and Canada and Mexico, and said any attempt to reopen or threaten these agreements “could have dire repercussions on our industry.”

The coming year will show if Trump can turn economic rhetoric into some workable, prosperous, economic policies. If he can, trucking benefits; however that prospect remains very uncertain.

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