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NADA Economist: Trump Needs to Clarify Economic Policy Goals

NADA Chief Economist Steven Szakaly says a clear set of economic policy goals delivered before the New Year would go a long way to ensuring that any immediate uncertainties are smoothed over.

by Steven Szakaly
November 10, 2016
3 min to read


In assessing the impact that the election of Donald Trump to the presidency will have on the markets and the economic outlook, it is first vital to properly separate the immediate from the short term, medium term and long term.

As for the immediate, indicators such as stock markets, gold prices and foreign currencies are currently reacting to fear and uncertainty — not economic fundamentals. Similar to the immediate aftermath of the Brexit vote, Tuesday night and Wednesday's market reactions are a reflection that, above all else, markets hate uncertainty, and that markets are still in the process of adjusting to the fact that computer models have been unable to help them make accurate predictions of political outcomes.

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Moving on to the short term, it's entirely possible that markets will continue react poorly, as companies are likely to take a breather on hiring and capital expenditures. That said, the more important short-term indicator is how consumers react, and in this regard we expect their reaction to be generally positive. Both happy people and sad people tend to spend more as long as they have jobs and unemployment is at historic lows. So barring a serious bout of layoffs affecting multiple industries — which is highly unlikely — economic activity will continue at the somewhat moribund rate we have seen as of late.

Over the medium and longer terms, Trump's stated or understood policy objectives will produce significant positive tailwinds, particularly as they direct us to lower corporate taxes, increased infrastructure spending, and reduced regulation across all aspects of business. The negatives are, of course, an assault on free trade and immigration. But these require a nuanced look. Trump has been notably silent on the status of H1B visa grants for highly educated workers, and, given his general pro-business posture, it is not completely out of the realm of possibility that the H1B visa program gets expanded under a Trump administration — which would be a boon to U.S. economic growth. And on trade, even if Trump truly wants to end NAFTA, he will find himself stymied, as these trade deals are complicated and require exit negotiations. What's more, it would take years for the negative effects of a successful exit to take hold.

What is needed is clarity. A clear set of economic policy goals delivered before the New Year would go a long way to ensuring that any immediate uncertainties are smoothed over.

So where does this leave car sales? Still slowing in response to the U.S. market maturing — but not as a result of the election. In fact, in the medium and long term, if increased infrastructure spending happens and certain tax cuts materialize, it will mean a better long-term outlook that what's in front of us at present.

Szakaly is chief economist of the National Automobile Dealers Association.

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