04/22/2018

Trump Bump Provides Economic Boost

Source: Tire Business

"Everything connects to everything else." This observation, first made by Leonardo da Vinci, is especially true when it comes to how the U.S. economy is working.

Much has been written, both positive and negative, about the Trump Effect and whether it is real or imagined. But in terms of economic growth, connections can be made with his administration's policies.

These connections can be made to a rollback of regulations, the tax overhaul and the promise of new investments in infrastructure.

Days after Mr. Trump took office, he signed an executive order to roll back regulations. The president also demanded that any new regulation must be offset by the elimination of two regulations.

His critics say regulatory rollbacks may only play a minor role in economic growth, while advocates are adamant that they have made a significant impact.

It has been a few weeks since Congress passed the biggest tax overhaul in 30 years, and according to most reports, businesses are poised to spend more on plants, equipment, new factories and infrastructure in 2018.

Executives appear to be confident that there is a more favorable business climate in which to grow. Less regulation and lower taxes mean more profit. And this confidence will impact other businesses as well.

As Joseph LaVorgna, chief economist for the Americas at Natixis puts it, "Somebody else's capital outlay is another company's income."

With expected outlays to increase in construction, manufacturing and transportation, we at Double Coin expect significant growth in demand for our OTR and TBR tires in 2018.

The news so far is good. For the fourth quarter of 2017, U.S. GDP grew at a rate of 2.6 percent and Mr. Trump has championed this year's goal of economic growth in the 4-5 percent range.

According to the Wall Street Journal, each additional percentage point of growth adds $2.5 trillion and 10 million jobs to the economy. Another statistic of note: 2017 spending on commercial construction, equipment and software climbed at a rate of 6.8 percent.

Currently, Republicans and Democrats are advancing competing infrastructure plans. Mr. Trump recently unveiled his $1.5 trillion infrastructure plan to repair the nation's airports, highways, waterworks and bridges.

The plan commits $200 billion federal funds and seeks to attract $1.3 trillion in state, local and private investment. The plan also aims to reform the permitting process, in order to make it easier to start a project. Despite the divisions that exist between the two parties, there is hope that an infrastructure bill will be one area where they can work together.

What will this mean for businesses in the trucking, manufacturing, construction and heavy equipment industries?

It means more trucks, trailers and intermodal equipment on the road, more construction and heavy equipment being put to work. And that means more TBR and OTR tires being purchased.

With tax reform, less regulatory burden and the promise of an infrastructure bill, Double Coin anticipates commercial tire sales to be significantly better than originally planned.

And as the general economy grows, commercial tire dealers can be confident their sales will grow as well.

Lower taxes, less regulation and new investment in infrastructure are going to make this year great.