The US economy is heading to more expansionary fiscal policies

After being elected, Donald Trump in his victory speech promised to rebuild the infrastructures in the US, which would require a huge amount of government expenditure. Moreover, Trump's "put America first" political strategy could lead to protectionism. In addition, the defense company stock prices rise sharply due to his aggressive populist and anti-Muslim comments.

Up to now, Trump's policies require a sharp increase in the government expenditure while he does not have effective budget saving policies yet; therefore, we can see that the government deficit could increase to an even higher level. This is why we are seeing a surge in bond yields. Some experts suggest the American inflation rate will also increase sharply, as the current unemployment rate is close to zero, while the government expenditure is expanding, more money is pumped into the American economy, so the inflation rate should rise sharply when Trump starts to exercise his policies.

In addition, Trump promised previously in his campaign speeches that he would issue a big tax cut. The inequality in America can increases, but the firms can benefit from the tax cut. Protectionism could impose heavy import taxes and effect firms' profitabilities. I think that according to the current situation, the rate of these import taxes could be extremely high in order to compensate the losses from his tax cut to the government budget.

Overall, as Trump does not have a clear budget saving policy, the increase in import taxes is currently the only budget saving policy at the moment, I expect the American government deficit may further increase and firms which focus on the American domestic market will make much more profits under Trump's presidency while the multinational companies may perform better domestically but lose profits due the other countries' revenging increase in their import taxes.