Last updated on January 3rd, 2019 at 03:35 am
The Trump economy is finally kicking in.
After increasing steadily during the Obama years, the stock market declined substantially in 2018. Many economic experts say that this is a forecast of troubles ahead as 2019 might bring declining economic growth and possibly a recession. It may also bring the end of Donald Trump‘s reign as leader of the free world.
The Dow Jones Industrial Average fell 5.6 percent in 2018, the S&P 500 tumbled 6.2 percent, and the tech-heavy NASDAQ dropped by 3.9 percent. These are the worst losses since the 2008 financial crisis.
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These large stock market declines undercut one of Donald Trump‘s favorite talking points during his first year in the White House, when he bragged continually about stock market record highs. However, most people realized that 2017 was merely a continuation of the Obama economy, and the economic effects of Trump’s policies wouldn’t kick in until 2018.
And when they did, it was not pretty. The economy became overstimulated due to unnecessary tax cuts for corporations, which required the Federal Reserve to increase interest rates, slowing economic growth.
In addition, Trump started a trade war by imposing tariffs on both allies and competitors. This cut economic activity and foreign trade, and has led to more predictions of economic troubles in 2019.
Wall Street analyst Fred Cannon said:
“We know the economy is likely to slow because you have the waning effects of tax cuts, you have the impact of higher rates already, and you have trade friction.â€
The Federal Reserve has raised short-term interest rates nine times, to a range of 2.25 percent to 2.5 percent, since cutting them to nearly zero during the financial crisis. This has led to Trump’s criticism of Fed Chairman Jerome Powell and even threats to fire him, which would create even more turmoil in global financial markets.
David Bianco, a top investment analyst in New York said:
“Tension between the Fed and the president is obvious. This is not a first for the Fed. The Fed must make the right decision for the economy, not its credibility or autonomy.”
But everyone knows that presidents should not interject politics into global fiscal policy. If they try to do that, it will only add to the chaos.
Trump has also threatened to add tariffs to another $267 billion in Chinese imports, which would further hinder economic growth. He has already imposed duties on $250 billion of Chinese goods, driving up supply costs for U.S. businesses, as well as double-digit levies on steel and aluminum. Trump has also threatened tariffs on imports of automobiles and parts.
“We see slowing across the board, and we think tariffs are driving much of that slowdown,” said Rob Martin, an economist with a large international bank.
On top of that, consumer confidence is declining and many people believe a recession is right around the corner.
Trump is being threatened legally from several different directions, and this adds even more uncertainty and risk to the global economic outlook. As Democrats take over the house, they will begin hearings into Trump crimes as well as corruption in his administration. In addition, there is the ongoing Mueller probe and separate investigations into Trump‘s businesses by the U.S. attorney for the Southern District of New York and New York Attorney General.
The risk of impeachment is increasing, and this also increases the risk of global economic problems due to the chaos and uncertainty in Washington.
With declines in the stock market and a slowing economy, Donald Trump will also see declines in his support among investors both large and small. Top Republican donors may decide that having him as president is too risky, and they may tell their employees (GOP members of Congress, especially in the Senate) that it is time for him to go.
Certainly 2018 was a bad year for Trump‘s stock market, but 2019 may bring not only further stock market losses, but also the end of the Trump presidency.
I am a lifelong Democrat with a passion for social justice and progressive issues. I have degrees in writing, economics and law from the University of Iowa.
