Can Donald Trump boost US economic growth to 4%?

New President has put growth and jobs at the centre of his promises, but can he live up to his claims?

Trump US
(Image credit: Drew Angerer/Getty Images)

Donald Trump's inauguration speech was "perhaps the most xenophobic in US history", says the Financial Times's Edward Luce.

However, the new President's populism extends to more than a clampdown on illegal immigration and platitudes that he will put "America first".

A series of economic targets were uploaded to the White House website as soon as Trump took over, making boosting the economy "the official promise of the White House and the president", says Business Insider.

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What has Trump promised?

That he will boost growth and spread the benefits among a broader share of the population. Specifically on Friday, the government pledged to increase economic growth to four per cent and add 25 million new jobs.

How easy will that be?

Not very easy at all. The jobless rate is already below five per cent, the level most economists believe represents "full employment", although the proportion of adults active in the economy is near record lows.

Business Insider says growth is set to be 3.4 per cent this year and that given the "global nature" of the economy, it is hard to "outperform this by much".

What does Trump plan to do?

He's going to invest up to $1trn (£800bn) in infrastructure, cut Obamacare, which he says will reduce healthcare bills, and corporate taxes, relax business regulations and impose tariffs on assets imported into the country.

What will be the effect of these policies?

It's impossible to say. At the moment, nobody even knows if the former property mogul will go through with everything he said he would during the campaign.

In general, spending more on big projects and cutting the tax businesses pay should add value to the economy, although whether this will amount to enough to meet the pledges is not clear.

However, import tariffs and opposition to free trade deals - The Guardian says Trump has already moved to renegotiate a pact with Canada and Mexico - could act as a drag.

The World Bank said the proposed tax cuts would add 0.8 per cent to the US economy next year, but the loss of free trade could hit growth to the tune of one per cent.

How are the markets reacting?

For now, they appear worried. The dollar is down to its lowest against the pound since mid-December, a sure sign investors are rattled, although it had been boosted to 14-year highs after November's election so has room to fall. Stock markets, too, hit all-time highs in December and remain only marginally down now.

Bigger movements, one way or the other, will be expected once Trump's agenda really starts to take shape in the coming weeks and months.

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