Despite the pandemic that cost the American economy millions of jobs, and thousands of lives, the Trump Administration’s results impressed many people before COVID-19 hit.
His achievements left even most skeptics stunned, seeing how economic indicators showed how something as simple as a tax cut could reactivate the economy, in such a way that it would surpasses the expectations of even federal agencies themselves. At El American we recall what in our opinion were the five greatest achievements of Donald Trump’s economic policy.
Historic tax cuts
Perhaps Donald Trump’s most notorious legacy was his tax cuts through the Tax Cut and Jobs Act of 2017, where all income levels received across-the-board tax cuts that put more money in the pockets of Americans rather than the state.
American families, a product of the tax cuts, saw their incomes significantly increased every year. The standard tax deduction for a single taxpayer increased from $6,350 in 2017 to $12,200 in 2019. The deduction for married couples increased from $12,700 in 2017 to $24,400 in 2019.
In 2016, real median family income was $62,898, only $257 above its 1999 level. Over the next three years this income grew by almost $6,000 ending up by 2019 at $ 68,703.
The biggest beneficiaries of Donald Trump’s cuts were businesses that saw the corporate tax decrease from 35% to 21%, a low not seen before since 1939. These deductions allowed companies to generate more jobs and invest in capital to become more competitive in the marketplace.
A reduction in unemployment against all skeptics
From December 2009 to December 2016, America experienced a 5.2% reduction in its unemployment rate, from 9.9% to 4.7% in the Obama Administration. The Federal Reserve in 2016 concluded that America had reached its full employment level, thus further reductions in the unemployment rate were unlikely.
Despite the consensus of economists, Donald Trump’s corporate tax cut allowed businesses to increase their hiring levels. Although his policies were labeled irresponsible, not only did the unemployment rate decline to 3.5%, but more people joined the labor force, reaching highs not seen since 1980, with more Americans between the ages of 25 and 54 looking for a job or already holding a stable job.
Latinos, African-Americans and other minorities were the main beneficiaries of Trump’s cuts
Trump’s tax reforms benefited all Americans regardless of creed or race. According to Labor Department figures, the unemployment rate among Hispanics reached its lowest number since statistics have been kept at 3.9%. For the African-American population, unemployment also reached an all-time low at 5.5%.
The unemployment rate for Hispanic women in 2019 was 3.8 % and for African American women it was 4.6%. The unemployment rate among Asians also fell to historic lows placing it at 2.5% for September 2019.
In 2019, the poverty rate among African-Americans fell to a historically low 18.8%, a figure that Trump’s employment policy helped bring down. The Hispanic poverty rate also reached historic lows at 15.7%.
A new free trade agreement with Mexico and Canada
Another achievement of Donald Trump was to reestablish a new free trade agreement with Canada and Mexico, (USMCA), replacing the old treaty signed in the nineties, (NAFTA). This agreement has adapted to the dynamics of modern economies covering several shortcomings of NAFTA.
One of the major changes in the USMCA is that it requires auto companies to manufacture at least 75% of the components of an automobile in Canada, Mexico or the United States, previously the requirement was 62.5%.
At least 40% of the value of a passenger car and 45% of a pickup truck must be manufactured by workers earning an average of $16 per hour. Cars that do not meet these requirements will be subject to tariffs. In effect, the new agreement also protects Mexico and Canada from any future U.S. auto tariffs.
The USMCA also requires Canada to open its dairy market to U.S. farmers. Canada will have to eliminate its complex pricing scheme for dairy products and derivatives. These changes include milk protein concentrate, skim milk powder and infant formula. It also allows certain U.S. cheeses to be marketed to a greater extent in Canada.
The new agreement provides more protection for patents and trademarks. The treaty adopts the intellectual property rights framework negotiated in the Trans-Pacific Partnership abandoned by Trump. American pharmaceutical companies can sell biologics in Canada and Mexico for up to 10 years before facing generic competition. Previously, under NAFTA, this protection was eight years.
Handling the pandemic
Although many criticize the measures taken by Trump in relation to the pandemic, the former president sought to keep the economy active as much as possible until several governors began to decree quarantines in their states. The fact that the U.S. economy did not slow down in the long term is due to the fact that real sector activity never came to a complete standstill.
Although 22 million Americans lost their jobs during the first months of the pandemic, the rapid revival of economy activity allowed at least 12 million of those jobs to come back, and the outlook is for the U.S. economy to grow by 5.5% this year, partly supported by fiscal stimulus.
While the coronavirus may have cost Trump the presidency, his unorthodox policies provided results that left skeptics and analysts alike very surprised. For the Biden Administration to achieve results similar to those of its predecessor it will have to take note, and learn that markets and societies behave more harmoniously when left free.