Could a Trump Impeachment be the Economy’s Worst Nightmare?

By: Fatima Ali

As the impeachment inquiry continues, Americans are rightfully concerned about how the trial and a possible Trump impeachment could affect the American and global economy.

The timeline of the impeachment investigation is very unpredictable.  Speaker Nancy Pelosi has stated that she has “no idea” if the investigation will conclude by the end of this year.  This is why Americans should be especially worried about how this trial will affect them economically, not only in the short-term, but also in the long-term as the 2020 presidential election looms on the horizon.

 While President Trump and his advisors have blamed the media for overreacting to weaker economic trends and data, economists are highly concerned about threats to global trade upending America’s trajectory for growth.  Due to the ongoing impeachment investigation, it is unlikely that Congress will pass substantive legislation relating to trade or other matters with economic significance. Specifically, this can cause issues in passing the fiscal year 2020 spending bill, or ratifying the negotiated trade agreement between the US, Canada, and Mexico.  Furthermore, as the stress of impeachment increasingly influences President Trump, he may unleash impulsive decisions that have wide-ranging ramifications on the economy, such as levying higher tariffs on Chinese goods or striking a premature trade deal to create a momentary blip in the economy.  These actions also would serve the dual purpose of diverting attention away from the impeachment inquiry.

The circumstances are very different since the last time an impeachment investigation occurred during President Clinton’s second term in 1998.  Although the economy mildly suffered during both Presidents Clinton and Nixon’s impeachment investigations, research has since found that non-economic events tend to not have an considerable impact on the stock market.  For instance, during President Nixon’s impeachment investigation, the US stock market was in a bear market, and most of the fluctuations in the economy were blamed on the OPEC oil embargo crisis.  Meanwhile, during President Clinton’s impeachment, the stock market had a deep plunge, as a result of the global debt crisis.

However, despite the fact that President Clinton was impeached in 1998, the economy continued to soar, and the economy grew about five percent as a result of the dot com revolution.  Unfortunately, times are different now, and America is deeply embedded in a trade war with China while also navigating uncertainty with North American Free Trade Agreement (NAFTA) renegotiations.  Specifically, China may try to drag out the trade wars, at least until there is a better understanding of who will win the “political battle in Washington.”  Combined, these developments contribute to low consumer confidence and a slowing economy, the likes of which may engender a recession.

Luckily, according to the Federal Reserve, the United States is enjoying its longest bull market in history: corporate profits are an all-time high, unemployment is at a 50-year low, inflation persists below 2 percent, and interest rates are presently falling.  Unless there is a drastic change in governance, it is unlikely that investors would be affected by the impeachment. Moreover, if President Trump were to be impeached, he would most likely be acquitted by the Senate and stay in office for the remainder of his term.  Should President Trump be impeached and removed from office, Vice President Mike Pence is constitutionally designated to replace him, and his economic policies would be near-identical to those pursued by President Trump.  Lastly, there are many other economic factors that may affect the global economy, mainly the Japanese value-added (VAT) tax decision, the transition from Mario Draghi to Christine Lagarde at the European Central Bank, and Germany’s Q3 GDP flash report indicating whether their economy has slipped into a technical recession.  Furthermore, there is a potential for the US to reach a trade deal with the UK, if Brexit becomes official.

 For now, it’s important that investors react carefully when making serious investment decisions.  It’s tempting to act impulsively, especially when reading editorialized news headlines. Regardless of what happens in the world of politics, following the golden rules of investment should be central to any investment strategy: maintain risk tolerance, ensure asset allocation matches needs, and maintain an emergency fund in case things go astray.

  Impeachment or not, the international economy is sure to be affected throughout the duration of President Trump’s impeachment investigations.  When it comes to the economy and the welfare of the American people, it is best to remain alert and proactive to substantial events. The economy has been experiencing slight difficulties for some time now, but impeachment alone does not causally equate to recession. A variety of factors, from national to international, will determine the course for American and global growth. While the president is singularly focused on the fate of his presidency, in truth, his probable impeachment would be but a mere ripple among global economic tides.


Leave a Reply

Your email address will not be published. Required fields are marked *