It’s the Economy, Stupid!

Donald Trump wants to see the American economy remain in good health until the next elections in 2020. However, his aggressive policies could exacerbate worldwide tensions.

“It’s the economy, stupid!” This is what Bill Clinton said in 1992 to outgoing president George H.W. Bush. Instead of focusing on the economy during his electoral campaign, the latter glorified his military record. This was a mistake that proved fatal to him during the election. Donald Trump does not want to repeat the same mistake. This is why he is putting pressure on the Federal Reserve to ease its monetary policy in order to protect economic growth. Incidentally, some think the United States could possibly fall into recession in 2020, the year of the presidential election itself.

The world economy is currently undergoing a time of significant turbulence. The turmoil on the stock exchange is only a reflection of this. Trump’s America can be blamed for at least two reasons: interest rates and the context of a trade war.

As for the first reason, the Federal Reserve is ultimately only doing its job by putting interest rates back up so as to turn a profit now so it can lower them later in the event of economic hardship. If the Fed may appear rather restrictive, it is also because Trump lost no time in launching a fiscal reform while the U.S. economy was operating at full capacity. This, without a doubt, owed to a fear of a disappointing outcome in the midterm elections.

The other reason relates to the trade tensions initiated by Washington, which have already cut global GDP by 0.1 to 0.2 percent this year according to the OECD. This figure is still likely to worsen, hence the call of the organization to re-establish confidence in international institutions to renew dialogue between all countries. The situation has indeed become urgent.

Is this to say that the country of Uncle Sam alone is responsible for the current situation? The answer is no, given that Europe is lagging economically as a result of the uncertainties linked to Brexit, the deadlock in Italy and the lack of further advances concerning the monetary union. It remains to be seen when we will see an angry tweet on the subject from Trump.