Amid reports that top GOP members are reportedly becoming nervous about the impact of a full-fleged repeal of health care, that political pushback "does not bode well for reaching a quick agreement on tax reform or infrastructure funding, and reinforces our view that a fiscal boost, if it happens, is mostly a 2018 story."
Indeed, Utah Republican Senator Orrin Hatch said that he was "not very enthused" by the prospect of broad tax reform, The Associated Press quoted Hatch as saying. A politically thorny proposal for a "border adjustment tax" —seen by some as a linchpin to force Mexico to foot the bill of building a border wall —is also dividing members of the GOP.
"Some of the recent administrative actions by the Trump Administration serve as a reminder that the president is likely to follow through on campaign promises on trade and immigration, some of which could be disruptive for financial markets and the real economy," according to Goldman, saying that the president's agenda "present risks in both directions."
Goldman still expects a modest fiscal policy boost of about 1 percent of gross domestic product via tax cuts next year, but doesn't believe a border adjustment tax will make it into tax reform. The bank also expects a boost on import tariffs, and lower levels of immigration.
Trump's polarizing travel restrictions on immigrants from seven Muslim-majority countries linked to terrorism have already had negative effects on the tech sector, as well as other visa holders.
Silicon Valley has largely denounced the travel ban, which now threatens to become ensnared in a protracted battle between the executive and legislative branches, and increasing generalized uncertainty.
"Immigration restrictions could lead to an overly tight labor market and a slowing in final demand, and trade restrictions could pose risks to corporate profits and ultimately to growth if trading partners retaliate," Goldman wrote.