US: Shift to moderate growth? - Natixis

Patrick Artus, Research Analyst at Natixis, suggests that it seems inevitable that the United States is about to face a shift to moderate growth as the economy returns to full employment and a significant deterioration in foreign trade due to the stimulation of demand at full employment.

Key Quotes

“Trump is certainly not going to like the fall in US growth and the deterioration in its foreign trade. But how can he respond?

• With an even more expansionary fiscal policy? It would worsen its foreign trade even more;
• By pressuring the Federal Reserve to slow the pace of its monetary policy normalisation? At full employment, this would not boost growth;
• By ramping up protectionist measures? Due to the fact the price elasticity of imports in volume terms is zero, tariffs would not improve foreign trade and would simply reduce real income and demand.”

“Trump’s possible responses to the weakening of US growth and the deterioration in its foreign trade would therefore not have any positive effect on either of these two variables and would even exacerbate the situation of the United States.”