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Analysts at ING point out that the US President Trump has primarily targeted healthcare, taxation and trade in the first half of his Presidential term. January’s State of the Union address suggested infrastructure and further tax reform would be the main thrust of the second half.

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“The upcoming mid-terms could easily scupper that plan assuming the Democrats perform as well as pollsters expect.”

“Our base case is that a split Congress will mean his legislative agenda is curtailed, but not completely blocked though this will require working with the Democrats, such as on infrastructure.”

“Trade policy will remain in focus, but if he can forge a united front with the EU, Canada and other key partners regarding China, there are more likely to be concession he can label a “win” for his stance. Further tax reform is possible, but new initiatives would need to be focused at the lower end of the income distribution to get Congressional support.”

“This is a relatively benign story for the economy and asset markets. However, the challenges the US economy faces will intensify. The fading support from the fiscal stimulus, the strong dollar and higher interest rates together with growing concerns about the prospects for emerging markets are all likely to weigh on activity.”

“An all-out trade war would compound these problems and risk a downturn in US growth prospects and asset markets. Such a situation would pose even bigger challenges for President Trump if, as most analysts expect, he seeks re-election in 2020.”