The Political Risks Of Trump
The Political Risks Of Trump
On 6 November 2024, it became clear that Donald Trump was elected the 47th President of the United States of America and will be returning to the White House in January 2025.
You can love him or loathe him, but he is back for four more years, and this means Trump-Economics will be returning soon, and if you can believe what Trump says (you can’t) — then his second act will be that of revenge, nationalism, isolationism etc.
When I say you cannot believe the man, I mean this to be a good thing, hoping that sanity will prevail; so thank God the media rates him as one of the biggest liers of all time; which says a lot in the world of politics. In 2021, the Washington Post wrote an article titled “Trump’s false or misleading claims total 30,573 over 4 years”. [Link]
In a recent CNN article covering Trump’s Joe Rogan podcast, CNN claims: [Link]
“Donald Trump sat down Friday with prominent podcast host Joe Rogan for a conversational interview that ran for nearly three hours — and the former president delivered his standard bombardment of false claims, at least 32 in all.”
If Trump did what he said he would, Hillary Clinton would still be in jail, and America’s crushing debt (+- US$ 37 Trillion) would be a thing of the past by now — none of this happened — although he claimed both of these items were on his previous agenda.
Let us leave the man and focus on the possible economic changes he might invoke — although he does not always seem to understand the consequences of his suggested policies.
Trump has always shown a distaste for government bureaucracy, attacking the “deep state” and the corrupt government departments. He does not like corruption.
As a side-note: A jury of 12 found Trump guilty on 34 charges of fraud. Here’s a summary from CNN:
“Trump was first indicted in March 2023 by the Manhattan district attorney on state charges related to a hush-money payment to an adult-film star in 2016. On May 30, he was found guilty on all 34 counts of falsifying business records in the first degree by 12 jurors. Prosecutors alleged during the trial that Trump was a part of an illegal conspiracy to undermine the integrity of the 2016 election. Further, they alleged he was part of an unlawful plan to suppress negative information, including the $130,000 payment. Trump pleaded not guilty.”
Trump aims to relax rules and regulations for businesses; what this will entail, time will tell, but let us not forget the market crash of 2008, when bankers grouped together “rubbish” (sub-prime mortgages) and sold it to various parties as something else (CDO’s and MBS’s) before it all collapsed. Part of this collapse originated from relaxed regulations and easy money given out without proper regulation and due diligence when vetting loans. To note again: the issue wasn’t just deregulation but also the lack of enforcement of existing rules and the complicity of various institutions, including credit rating agencies (many of these products received AAA ratings). (My aim is not to recount all the causes of the 2008 crisis)
Trump now favours the crypto market after previously calling it a scam. No surprise then that the price of Bitcoin increased on the news of Trump’s election. Furthermore, no surprise that the Trumps are now entering the world of crypto with their own venture. Luckily for them, crypto regulations will now be relaxed — or so Trump hints.
Trump indicated he wants to reduce corporate tax rates, which will lead to increased profits and a boom in the general stock market. How the government will make up the shortfall remains a mystery. One way to make up the shortfall is to borrow more money, which will increase the already out-of-control national debt.
The impact of deportations — a suggested 11 million people (± 4% of the entire USA population) — will not only create possible economic issues such as labour shortages, billions in deportation costs, and increases in the CPI, but more distressing, a humanitarian crisis. The long-term effect of this could be a permanent labour shortage as new generations of foreigners say “No, Thanks” to working in the USA again.
China is on Trump’s radar, and he proposes trade tariffs of up to 60% on certain imported goods. We will have to look at the details of which goods exactly will be affected — as most of this could be bluster. If you add some extra taxes to a few toasters from China — well then no big deal — it does sound very “strong”, from a Nationalistic, Isolationist ideology perspective.
With his political trifecta in place, the Trump administration is in a strong position to effect change. How much of his campaign talk will he will put into action; we will have to wait and see?
One thing is for certain: if you are a business, especially an international business, you need to put Political Risk at the top of your agenda, as this might have an outsized influence on the strategies you create to reach your goals.