President Trump has a good reason to smile about. The entire market is on pace for a 4.1% annual growth rate. This is a phenomenal growth rate for the largest economy in the world. Purchase of goods has jumped 5.9% mostly because of and increase in auto sales, while services increased by 3.1%. On top of that, exports were increased by 13.3% and spending by state and local government rose by 1.4%.

However, economists are debating weather the amazing US growth rate will sustain itself in the next quarter. Q2 didn’t manifest the tax reductions Trump initiated, the trade war Trump is having with China and Europe could force the export and import rates to drop and lower the growth rate.

 Why we should be concerned

Increase in private consumption isn’t always a good sign for growth because private consumption wouldn’t remain so high without an increase in investment or in taxes. As government spending is also on the rise the tax burden will increase on the citizens. However, with the latest tax reform, that won’t happen anytime soon. Therefore, the national debt will increase and the interest rates will on that debt will rise. Perhaps this regime won’t face the consequences of the increase in national debt, but the people of America will

Import and export were on the rise, but the with the speculations revolving over the trade war, I doubt that they will increase in the next quarter. In economics 101, I was taught that a relative advantage is what markets should build upon. With the US increasing taxes on imports, it’s quiet certain that private consumption will decrease since prices will be higher for certain products. On the contrary, counter taxes will limit export and that would hurt a lot of people’s jobs and there will be less money to spend so private consumption will decrease once again.

In a way, you can’t fight globalization, it happens all over the world. We are more connected than ever and the boundaries between countries seem less and less relevant. So why did Trump initiate the Trade Wars? He stated that its about creating jobs in the US. I believe it doesn’t make sense since the US will lose it’s relative advantage over other countries. What made the US the biggest economy in the world was pioneering the globalization process, this world trend is already bigger than the US and if the US will go against it, their export will plummet.

Trump is excited about the US growth rates, and he should be. The only question is, if the economical direction he’s taking will maintain the growth rate or will damage the economy. Only time will tell if Q2 results are artificial or an indication for a massive growth spurt.