Economic Policy

How to Tame Trump

  • Why it matters

    Why it matters

    The economic policies being proposed by the new U.S. administration have caused uncertainty in markets and the U.S. dollar has weakened somewhat recently. But it is expected to rise in the long term, analysts say, which would weaken the U.S. exporting ability and impact on U.S. businesses.

  • Facts

    Facts

    • The Trump administration believes that tax cuts, deregulation and funding major infrastructure projects will drive growth in the U.S.
    • Before the election, the U.S. already had unsustainably high public debt. Mr. Trump’s would add another $6.2 trillion of debt, analysts say.
    • In Germany, leading economists have advised German companies to reconsider investing in the U.S. because Trump policies risk destabilizing the economy.
  • Audio

    Audio

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US-Notenbank – Dollar
Going up: Analysts say that the U.S. dollar is expected to rise in the long term. Source: DPA

One vision to guide the country, one vision of the power of the people, protected by the military and by God. A “historic movement like the world has never seen before.”

This is how Donald Trump proclaimed his presidency. And few would deny, a month after his assumption of office, that we are in fact witnessing a historical moment. There has never before been an American president like this. A president who thinks of himself not as a politician but as a tribune of the people – and who considers himself to be unassailable, as such.

This is the only explanation for the arbitrariness and unpredictability with which Mr. Trump acts. One minute he is expressing his admiration and “enormous respect” for the journalists of the New York Times. The next, he castigates them as “enemies of the American people.” Some days he promises to fight intolerance and do everything possible to preserve peace for African Americans and all Americans. Other days, he makes ready to remove millions of illegal immigrants – a process which, in this order of magnitude, is equivalent to an inhumane mass deportation.

It’s hard to know if one should even hope for an impeachment. It could lead to something close to a civil war on U.S. streets.

Surreal moments are occurring so frequently that the head of Sweden’s government, for example, openly asked what the president had been smoking when he ranted about a terrorist attack in Sweden that never took place. Some psychologists are even allowing themselves to make a remote diagnosis on the basis of the president’s peculiar behavior: Pathological behavior due to a narcissistic disturbance, they suggest.

Meanwhile Mr. Trump’s unpredictability and his disdain for the accepted channels of governmental power as well as for national and international institutions have come to irritate not only the left, but also large segments of the conservative establishment.

But who, or what, can stop this man? The legendary checks and balances of American democracy? The courts may prevent the worst domestic political damage and keep Mr. Trump from one outrageous action or another, such as the travel ban for Muslims from arbitrarily selected countries.

But removing Mr. Trump? It’s hard to know if one should even hope for an impeachment. The possibly-illegal Russian connections makes such a process conceivable. But he has polarized American society to such a degree that his removal through legal means could lead to something close to a civil war on U.S. streets.

The question for Europe remains: Could we put the U.S. president in his place? Could German chancellor, Angela Merkel, who has been described as the last defender of Western values, do this?

It hardly seems likely. Europe is weaker and more divided than ever. The renewed threat of Greek insolvency looms; the euro crisis could quickly escalate once again, and along with that, other unresolved economic controversies among the E.U. states. Additionally, in the coming months, a weakened chancellor will have to attend to an election campaign, whose outcome is further from certain than it was previously.

Even worse, many E.U. countries have also been infected with the nationalist Trump virus. The assumption that Europe is capable of rescuing American democracy, or even of taking over the U.S.’ role as guarantor of a world order based on freedom and multilateralism, borders on ignorant pride.

Mr. Trump’s great vulnerability lies in his economic calculations – because these will not work out the way he wants them to.

It’s clearly a good idea for the E.U. to respond to the current situation by strengthening alliances and trade ties with Asia and other continents. But it is also clear that external influence on the U.S. can only have a limited impact. Moreover, no one knows how the choleric in the White House would react to diplomatic pressure.

Mr. Trump’s great vulnerability lies in his economic calculations – because these will not work out the way he wants them to.

Because sooner or later, all those neglected individuals who support Mr. Trump’s “historic movement” will suffer from his protectionist policies. And this may happen faster than many imagine.

The strength of the dollar is a first indication. It is not only a planned infrastructure-building program worth billions, a range of tax reductions and proposed taxes on imports that will strengthen the dollar and weaken U.S. exports. Mr. Trump’s policies are causing insecurity on the markets and investors are seeking refuge in the world’s leading currency, the dollar.

Mr. Trump has said that the dollar is too strong and it’s “killing us.”

He is correct. But what he neglects to say is that this is also the fault of his policies. Historically, no country’s economy has ever benefited from walling its industry off from competition.

Strengthening American industry is Mr. Trump’s stated political goal. This is what he will be judged on by many of his followers. There’s no doubt that they will realize pretty quickly, this isn’t a matter of fake news, when they lose their jobs.

 

To contact the author: muenchrath@handelsblatt.com

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