Slower growth coupled with higher inflation, interest rates and government debt load. That’s what the U.S. economy will look like under President Donald Trump, according to Mark Zandi, chief economist of Moody’s Analytics.
The firm’s “outlook for the U.S. and global economies has been shaken up by the shocking election of Donald Trump as president of the United States,” writes Zandi in the firm’s latest monthly economic outlook. “Based on our analysis to date, the economy under President Trump will likely perform a bit better in the near term but ultimately it will be diminished.”
Zandi is projecting that GDP growth under four years of President Trump will be less than 2% per year, below the 2.2% he had been forecasting before the election. “That is not a big difference in any given year, but it is meaningful over a four-year period,” writes Zandi.
Key reasons for his weaker outlook: A smaller workforce due to Trump’s immigration policies, which will cause some undocumented workers to leave the U.S. and fewer entering; a slowdown in global trade – Trump has threatened to impose tariffs on imports from China and Mexico – and a stronger dollar.
Zandi’s colleague, economist Michael Ferlez, writes that deportations could reduce the U.S. labor force by 2.16 million, or 1.4%.
Zandi expects the dollar will continue to strengthen against the euro and Japanese yen, boosted by Fed rate hikes, and remain “the global economy’s principal reserve currency for the foreseeable future.”