President-elect Donald Trump's policy mix could prove an overall negative for the world economy, according to an analysis by Goldman Sachs Group Inc.
Goldman analysts cite Trump's promised combination of fiscal stimulus, trade tariffs, stricter immigration rules and higher interest rates.
While developed economies could get an initial boost from a U.S. fiscal stimulus package, the impact would quickly fade and spillovers into emerging markets are negative, Goldman said.
"Our analysis suggests that Mr. Trump’s policies might act as a modest drag on global growth," the Goldman economists wrote. "A larger fiscal package could boost global growth moderately more in the near term, but a more adverse policy mix would likely act as a significant drag on world growth in subsequent years."
In theory, a burst of U.S. government spending has positive spillovers. Stronger U.S. demand would also boost purchases of foreign goods and services. A likely stronger dollar would also help developed economies with floating exchange rates, though gains for emerging markets would be more limited.
"The spillovers to China, for example, depend on the extent to which the renminbi appreciates with the dollar and the net effects are less positive for emerging market economies that rely heavily on dollar-denominated debt," Goldman economists led by Jan Hatzius said in a research note dated Nov. 13.
It's the combination of Trump's policy mix where the real risks lie. The president-elect has floated the need for import tariffs as high as 45 percent on goods from China. A promised immigration crackdown and preference for a more hawkish Federal Reserve would all likely have negative spillovers for the rest of the world.
"The growth drag is generally muted for developed market economies with floating exchange rates but significantly negative for some emerging market economies including China," said Goldman.
To be sure, judging the impact of Trump's promised policy mix depends on how much campaign rhetoric translates into government policy. For now, though, there are clear worry points for a global economy that's already struggling for growth traction.
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