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According to James Knightley, Chief International Economist at ING, life is going to get far tougher for President Trump as the split Congress (Democrat House and Republican Senate) means that there is more likely to be gridlock, which will significantly curtail his legislative agenda.

Key Quotes

“Bi-partisan action may be possible in areas such as infrastructure spending, but for the most part divisions between and within the parties mean that progress will be difficult.”

“Faced with this, the President is likely to focus his attention on areas where his executive powers give him more leeway to set the agenda, such as trade policy. This suggests that he is likely to continue pushing hard on China to make concessions that will contribute to getting the  bilateral trade deficit lower and do more to protect US intellectual property rights.”

“This in itself may well get backing from Democrats, but they are likely to be more resistant to starting a trade war with traditional allies such as the European Union or pulling out of the World Trade Organisation. Instead, we may get more discussion about working together with Europe in order to stand a better chance of getting movement from China on trade.”  

“There is, of course, the remote possibility that President Trump and the Democrats choose to bury the hatchet and work together – both President Trump and current Democrat House minority leader (likely next House Speaker) Nancy Pelosi have called for bi-partisanship in the wake of the results.”

“This would be a positive for growth, but given the hostile and polarised nature of Washington politics right now this would be an uneasy truce.”