Among US President Donald Trump’s campaign planks were tax cuts. But from the first look at his proposed reforms—short on detail and liable to cost the treasury an estimated $5.5 trillion over a decade due to measures such as slashing corporate tax from 35% to 15%—they are lacklustre.
Deficit hawks in his own party are unlikely to sign off on such profligacy, and the controversial import tax that is needed to offset the cuts has sailed into rough waters, too.
If the tax reforms go through in their current form, emerging markets are likely to be hit as dollar flows are diverted back to the US—so the roadblocks are not unwelcome.
But there is a larger question here: the healthcare debacle and uncertainty over tax reforms cast a shadow over the US President’s ability to deliver on campaign promises. The global economy has been reflating since mid-2016 and financial markets are exuberant, but if Trump is not able to deliver on his promised fiscal push, it will be interesting to see how long they retain their exuberance.