In fact, the impact of a Trump victory on the U.S. could well be worse. Whereas British Prime Minister Theresa May’s government wants to close the U.K.’s borders to immigrants from the EU, it does want trade with the world. Trump, on the other hand, is determined to curtail imports through a variety of policies, all of which are well within the power of a president. He would not need congressional approval to slam the brakes on the U.S. economy.
Even in the best of times, U.S. policy makers often do not think enough about the impact of their actions on the rest of the world. Trump’s trade-led recession would tip Europe back into full-blown recession, which would likely precipitate a serious banking crisis. If this risk were not contained — and the probability of a European banking debacle is already disconcertingly high — there would be a further negative spiral. Either way, the effects on emerging markets and all lower-income countries would be dramatic.
Investors in the stock market SPX, -0.68% currently regard a Trump presidency as a relatively low-probability development. But while the precise consequences of bad policies are always hard to predict, if investors are wrong and Trump wins, we should expect a big markdown in expected future earnings for a wide range of stocks — and a likely crash in the broader market.
Simon Johnson is a professor at MIT’s Sloan School of Management and the co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.” This article has been published with permission of Project Syndicate — The Consequences of a Trump Shock.
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but this is Even in the best of times, U.S. policy makers often do not think enough about the impact of their actions on the rest of the world. Trump’s trade-led recession would tip Europe back into full-blown recession, which would likely precipitate a serious banking crisis. If this risk were not contained — and the probability of a European banking debacle is already disconcertingly high — there would be a further negative spiral. Either way, the effects on emerging markets and all lower-income countries would be dramatic.
Investors in the stock market SPX, -0.68% currently regard a Trump presidency as a relatively low-probability development. But while the precise consequences of bad policies are always hard to predict, if investors are wrong and Trump wins, we should expect a big markdown in expected future earnings for a wide range of stocks — and a likely crash in the broader market.
Simon Johnson is a professor at MIT’s Sloan School of Management and the co-author of “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You.” This article has been published with permission of Project Syndicate — The Consequences of a Trump Shock.
MORE @ SOURCE
