14 Nov 2016

What’s Next for President Elect Donald Trump?

Donald TrumpA populist uprising that has very disturbing elements of racism, xenophobia, misogyny and isolationism has taken Donald Trump to the White House–a man with no experience in government or public service and a man whose business success has been sketchy at best.

America’s allies are in shock and have been deeply distressed about Trump’s implied New World Order for some time. Throughout the campaign, Trump questioned America’s longstanding alliances and praised Vladimir Putin (and Kim Jong-un). According to some, Mexico and Ukraine stand the most to lose in the election upset, but the North Atlantic Treaty Organization (NATO) is feeling the tsunami as Trump has questioned the value of the alliance. There is real concern that he could trigger trade wars, particularly with China, having promised to declare China a “currency manipulator” and increase trade barriers with that country. As well, he has said he will rip up NAFTA, oppose the Trans-Pacific Partnership that Prime Minister Trudeau rightly supports, and has even stoked the nuclear arms race.

This populist wave is spreading around the world. Brexit, which Trump loudly supported, was simply an opening salvo. Anti-globalization movements and anti-immigration could well provide a fatal setback to the opening of free markets that began with Ronald Reagan and the 1989 fall of the Berlin Wall.

Russia closely followed this election and interfered in its results through hacking and leaks that plagued Secretary Clinton throughout the final weeks of the campaign. Putin congratulated Mr. Trump publicly on election night and vowed to work closely with him. This is a destabilizing shock to the West where it appears that everything is at stake. Moreover, Trump has threatened to tear up the Paris Climate Agreement, denying that global warming is a man-made threat to the planet. He won West Virginia with promises to bring back coal mining jobs. He won the Rust Belt by promising to bring back manufacturing jobs, penalizing businesses that hire foreign workers.

Every undocumented immigrant in America, and there are an estimated 11 million of them, is under the threat of deportment. Their American-born children–the Dreamers–are at risk of seeing their families dispersed. The wall at the US southern border is just another one of Trump’s promises and, of course, he says Mexico will pay for it. Muslim Americans are reeling and Trump has said there will be extreme vetting of any Muslims entering the US–walking back somewhat from a complete ban.

Trump has said he would be “looking at” whether to recognize Russia’s 2014 annexation of Crimea, and to lift economic sanctions imposed on Russia with their continued threat to the Ukraine. He has also threatened to undermine the multi-nation agreement to stop nuclear proliferation in Iran.

More frightening still is that President Trump will have a Republican majority in both the House and the Senate. Many of these Republicans may not be his allies, but there will be little in the way of checks and balances on his power, at least until the midterm elections. It will fall upon the shoulders of the new Minority Leader of the Senate, Chuck Shumer (Dem, NY), to provide a ballast to the rubber stamping of Trump appointments and initiatives.

Trump has promised revenge upon his “enemies.” House Speaker Paul Ryan, whose support for Trump was, at best, lukewarm could well be in the cross hairs. Ryan has been a target for Stephen Bannon,Trump’s Campaign Chair and a leader of the extreme Alt-Right Movement. Bannon is editor-at-large of Breitbart News. Bloomberg News has called Bannon, “The most dangerous political operative in America.” Bannon has long wanted to take down Paul Ryan, Jeb Bush and Hilary Clinton. Bloomberg News says, “Breitbart News, the crusading right-wing populist website…is a haven for people who think Fox News is too polite and restrained.”

James Comey, Director of the FBI, clearly played a role in Secretary Clinton’s defeat as did Rudy Giuliani, former Mayor of New York, who coined the “lock-her-up” outbursts at Trump rallies. Even on election night at the Trump Victory Party at the New York Hilton, the crowd repeatedly chanted, “lock her up”. Trump has promised to do just that as president, showing a complete lack of understanding of the separation of powers between the executive and judicial branches of government. But maybe he intends to trash that separation as well.

He will have the opportunity to stack the Supreme Court with right wing Justices, as he has promised. We have already seen Trump attack federal Judge Gonzalo Curiel, who will preside over the civil trial over alleged fraud in the Trump University real estate seminar program later this month. No president-elect has ever faced such a legal ordeal while preparing to face the vast challenges a political novice confronts to assume the White House.

Donald Trump is uniquely unprepared to assume the presidency. By his own admittance, he does not read books and does not prepare studiously for anything. Former colleagues and biographers have said he has the attention span of a gnat. There is no way that Trump will plow through the volumes of briefing materials that confront a president everyday. As many have said, he does not have the temperament to see and appreciate the complexities and nuances of running the most powerful country in the world, And he is notoriously thin skinned and reactive–easily baited and intolerant of opposition. A key component of his message has been to vilify and demonize the media, calling them corrupt liars. He banned many from his press pool. The president-elect has promised to silence dissenting media and sue the dozen or so women that have accused him of sexual harassment.

We really know very little about this man. We have never seen his tax returns. We have no clear idea of his business connections with foreign governments and operatives, although we do know they are many. He says he will be arm’s length from his personal businesses and therefore not conflicted, yet we know his businesses will be run, not by a blind trust–as is customary–but by his children.

This is the end of the Obama legacy. Trump has promised to repeal the Affordable Care Act in his first week in office. No one really knows what to expect from Trump, but he clearly is an opponent of liberal democracy, open borders and free trade.

Not a single member or former member of the US President’s Council of Economic Advisers has supported Donald Trump. His economic policies, such as they are, are widely forecasted by the economics community to dangerously enlarge US budget deficits. He has promised to slash taxes, especially for high income people, as well as to cut the corporate tax rate dramatically. He says he will massively increase government spending for infrastructure and defense. And who will stop him?

He has very publicly and repeatedly criticized Janet Yellen, Chair of the independent Federal Reserve, calling her a puppet of the rigged economic system. There is a real risk that the Fed’s independence will be threatened. It has been widely expected that the Fed would hike the overnight fed funds rate when they meet again in December. With the Trump victory, the US yield curve has steepened sharply, taking long-term interest rates up significantly. Gold surged initially and has pared some of its gains, just as stock markets around the world have pared some of their losses.

Next-day movements in financial markets mean little, as we have seen with the Brexit surprise. No need to panic as stocks swing violently. Stocks sold off sharply after Obama’s victories and Obama has been great for the stock market, so no need to take rash action. Investors and markets do not like uncertainty and it will take some time to process these new developments.

President-elect Trump attempted to calm financial markets in his acceptance speech. But we have been waiting for months for Trump to become more presidential and much will depend on whether he surrounds himself with like-minded cronies or actually looks for the best and brightest experts and takes their advice.  The jury is out, but I am not confident he will do so. This is the man that believes that “he alone” can “make America great again,” whatever that means. He “knows more about ISIS than the generals.”

His supporters wanted to blow up Washington, and that they did. Apparently, nothing else mattered–not the three debates that Hillary Clinton clearly won, not the ground game, not the newspaper endorsements of Clinton, not the educated women’s vote, not the record turnout of Hispanics and not the Democratic stockpile of money. This is a very sad development for the US and the world, but for Trump’s jubilant supporters, they will not see it that way–certainly not now, and maybe never.

Dr. Sherry Cooper

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

More Posts - Website

Follow Me:
TwitterFacebook

  • Residential Mortgages

    The purchase of a home is the largest purchase most people make during their lifetime. At Dominion Lending Centres, we want to make each and every purchaser aware of the many mortgage options available to them prior to their purchase and closing date.
    Learn More
  • Commercial Mortgages

    Dominion Lending Centres Commercial has established excellent relationships in the lending community with pension funds, banks, credit unions, life insurance companies, trust companies, private institutions and individual investors.
    Learn More