If Trump is elected and successfully implements economic policies with protectionist and isolationist tendencies, how will the global market and the U.S. economy be affected?
MarketWatch’s report on the 13th analyzed the impact that Trump’s election may have on gold, the U.S. dollar, the euro, and the Chinese economy.
The report said that safe-haven assets will get a boost. The worst thing that could happen after Trump is elected is to trigger a global trade war, which will drive investors to gold and cause gold prices to rise. All other safe-haven assets, including the Swiss franc, will also rise.
The dollar will weaken. The dollar has rallied strongly over the past year as the U.S. economy recovered faster than other major countries, making it the first major economy to raise interest rates. Trump may think he is making the U.S. economy stronger, but that won't be reflected (at least not immediately) in currency markets. The U.S. dollar will sell off as other countries believe the U.S. will abandon its role in global affairs.
In contrast to the dollar, the euro will strengthen. Although the Eurozone economy currently has its own problems, its economy will improve in the future. If investors abandon the U.S. dollar, the euro will be favored as the only real alternative to the U.S. dollar.
China's economy will be greatly impacted. Trump has always emphasized protecting the manufacturing industry in the United States, and the United States is China's largest exporter. If Trump provokes a global trade war after being elected, the Chinese economy will bear the brunt. Since China is the main engine of global economic growth, a slowdown in China's economy will in turn quickly drag down the global economy.
In addition, Trump’s election will also have a negative impact on the U.S. economy. Oxford Economics points out that if Trump becomes president of the United States, U.S. gross domestic product (GDP) is expected to shrink by about $1 trillion by 2021 compared with normal development. Although Trump's protective trade measures, tax cuts, and massive deportations of illegal immigrants may be forced to reduce their intensity during negotiations with Congress, these policies will still have a negative impact on the U.S. economy. The agency predicts that based on current normal development, U.S. GDP will grow steadily at a rate of about 2% from 2017, and GDP will reach $18.5 trillion by 2021. But if Trump is elected and successfully implements the policies he advocates, U.S. GDP growth may drop to around zero by 2019, and the total GDP will drop to $1.75 billion by then.
The latest polls show that Democratic candidate Hillary Clinton is still in the lead, but her lead has declined in recent weeks. Especially when Hillary is in poor health, Trump's chances of winning seem to have increased.
