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Donald Trump a President – Effects on Global Economy

Friday, November 11, 2016 6:51
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Starting the end of January we will see Donald Trump having the authority on the US executive, together with the full support of the Congress, a Republican one that will sit behind them. This means that he will actually have the power to deliver a lasting and profound change, thus having a huge impact on the economy of the US and of the world. The big problem is that having Trump as the leader of the arguably the strongest country of the world is just like playing high stakes poker as the economic consequences can be costly and enormous if bad decisions are made.

The stock markets went down and opened low right after the results were in. We will see a long slump in the event the investors are not calmed. The global belief is that having Trump as president of the United States automatically means that future investments will be a lot riskier. This does harm corporate profits and growth on the long run. We have a pretty high volatility that will force the investors to basically take out insurance as risks are higher. It is normal to be faced with a second guessing of the safety that is offered from debt by the future American government.

The similarity to Brexit needs to also be taken into account. We are faced with economic effects that were drastically exaggerated following the vote in Great Britain. The exact same thing will most likely happen following the US elections. The speech that Donald Trump gave following the official results was good enough to calm the markets. We will see markets going down but the effects will surely be a lot lower than what we initially feared.

One food thing is that the policy platform that Donald Trump will have has the potential to be quite stimulative when referring to the medium run. Economic plans were never detailed but there are many things that are clear. The first thing is the wish to cut taxes, which would basically benefit rich people more than the poor but this also helps since the economy can be jolted by a government deficit. We will also see an increase in spending on infrastructure and defense. Government spending would increase in the event that people would be deported. Even so, nobody really expects to see a deportation process being started. Because of this, many think that the medium term effects of Trump being president will not be as bad as anticipated.

The really big problem with US economy under Trump rule is that an economic crisis will most likely immediately happen at the start of the following year. If this does not happen, things will be even worse as there will be long term effects that are going to be really profound. International institutions are now going to have difficulties in completing great trade deals. Old deals will be scrapped or just not reopened. Temporary trade restrictions are most likely going to happen but we cannot anticipate the huge effects associated with them.

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