3/3/3. That's Donald Trump's economic agenda summed up in a single formula. For the next four years, the United States' economic objectives are 3% growth, 3% deficit and 3 million more barrels per day of oil production. Before we embark on four years of sweeping declarations and triumphant announcements, let's take a look at the new administration's ambitions.
Oil: who will pump more?
Increased oil production has one objective: to bring down the price at the station. But in practice, this seems difficult. The United States is already the world's leading oil producer, and production has been rising significantly for just over a decade. With the development of shale oil, followed by improved drilling techniques, US production has risen from just over 5 mbpd (million barrels per day) in 2010 to over 13.5 mbpd in 2024.
What the Trump administration can do is remove all possible restrictions that prevent exploration or drilling, whether for oil or gas. And the executive orders are, dare I say, already in the pipeline. But the final decision to produce more rests with the oil companies. And they'll only do so if they're profitable.
Oil is currently at relatively low levels, between $70 and $80. And the risks seem to be on the downside. On the demand side, China may have already reached its consumption peak. On the supply side, OPEC has some leeway to increase production, having voluntarily withdrawn 2.2 million barrels per day from the market by 2023. This effort was largely borne by Saudi Arabia. Against this backdrop, American producers have no incentive to drill more. It is therefore in their best interest to pursue the strategy they have been pursuing for several years: prioritizing free cash flow generation over production volumes.
Deficit: the "wishful thinking" of 3%
You have to read it several times to believe it. Scott Bessent's stated objective is to reduce the deficit to 3% of GDP. Today, however, the deficit stands at 7%, and one of Donald Trump's key promises is to lower taxes. While he hasn't been very specific on the subject, the extension of "his" 2017 tax cuts alone - the TCJA (Tax Cuts and Jobs Act ) which expires in 2025 - would, according to CBO (Congressional Budget Office) estimates, cost $4,600 billion over 10 years.
And what is the Trump administration planning to do about it? By withdrawing from a few international agreements and organizations, the United States will be able to recoup at most a few billion dollars in contributions. Then there's the idea of DOGE (Department of Government Efficiency), a body created by and for Elon Musk, whose aim is to slash public spending.
But the main items of expenditure seem difficult to reduce. Healthcare, pensions, defense and spending on veterans are red lines. In other words, items that are too politically sensitive or too strategic to really tackle. And yet, this is where the vast majority of federal spending takes place. The other major item is interest on the debt, an incompressible expense if we are to continue borrowing on the markets. All the other budget lines taken together have a relatively low weight.
This leaves us with the idea of using customs duties to finance tax cuts. At present, this source of revenue represents less than $100 billion a year, a pittance on the scale of the federal budget ($7,300 billion by 2025). The plan announced by Donald Trump is to set up the External Revenue Service to collect revenue from generalized tariffs. But at this stage, it's hard to know what will actually be implemented, and therefore what additional revenues will be generated by "tariffs", to quote President Trump's favorite word.
The main problem with tariffs is that they are paid for by consumers. The American middle class has been traumatized by the return of inflation. And it is this trauma that largely explains the failure of the Democrats and Joe Biden, and therefore Donald Trump's return to business.
Reducing the deficit to 3% therefore seems unlikely. All the more so as the move from 7% to 3% cannot be neutral on economic growth. A significant reduction in public spending or an increase in taxes would automatically put the brakes on activity. This would make the third objective of 3% GDP growth unattainable.
Growth: towards a continuation of American exceptionalism?
Over the last six quarters, annualized quarterly US growth has been between 2.7% and 3.2%. Long estimated at around 2%, US potential growth now seems higher. Massive public and private investment and the recent upturn in productivity gains are enabling more vigorous growth. For 2025, the IMF forecasts a "modest" 2.7%. The 3% target therefore seems within reach. The positive confidence shock of Donald Trump's election and a few deregulation measures could be enough to reach it.
Source : Trading economics
3% growth seems the only realistic target. But an economy with a higher growth rate also generates more inflation. After peaking at 9% in the summer of 2022, inflation has gradually slowed to stabilize at around 3%.