When Donald Trump surprised pollsters by winning the 2016 presidential election, investors were unsure about his economic policies. During his first year in office, I wrote a book analyzing them to assess how they would impact financial markets.
One of the main findings was that Trump’s signature legislation, the Tax Cut and Jobs Act of 2017, would have a favorable impact. The reason is that it lowered the marginal corporate tax rate from 35 percent to 21 percent, bringing it in line with other industrial countries and reducing incentives for multinationals to outsource jobs.
In comparison, I maintained that increasing tariffs on goods from China and other countries would invite retaliation and heighten financial market volatility.
These findings were largely validated. The U.S. stock market rose steadily until Trump launched a trade war with China in spring 2018. Thereafter, it fell at one point by 15 percent and did not surpass its previous peak until mid-2019, when U.S.-China trade tensions lessened.
While inflation and unemployment were low during Trump’s presidency, many economists believe the policies Trump espouses are more extreme and threaten the U.S. and global economy. The Wall Street Journal’s latest survey of economists showed the majority expect Trump’s policies to lead to higher inflation and interest rates and larger budget deficits.
Trump’s tax proposals include lowering the marginal corporate tax rate to........