Two years after Donald Trump was elected, American voters have taken to the polls again for mid-term elections. These are held every four years in the middle of a President’s term of office, and let the US electorate show their support – or lack of it – for the President and his policies.
With the results counted, what will the economic impact be?
Hail to the chief?
The US electoral system is a mystery to most Brits. Just like in Westminster, Washington has two chambers, the Senate, and the lower chamber, the House of Representatives. Unlike Westminster, both houses are elected – although the way that elections are bitterly contested between Republicans and Democrats may seem very familiar.
President Trump is of course a Republican, and the Republicans have retained a majority in the Senate. However, the mid-terms, have given the Democrats control of the House of Representatives.
Not every American is behind Mr Trump
The vote could be seen as a referendum on the President. He claims to have brought an economic boom, but detractors argue that it was coming anyway, the result of recovery that began during the Obama years. The President is still very much in power, and has retained and even increased his control of the Senate, with a majority ready to support his decisions. But the lower house will become a thorn in his side.
The Democrats hinted that they will launch investigations into Mr Trump’s affairs, from tax returns and conflicts of interest to the question over Russian assistance with his presidential bid. Along with congressional oversight of his administration they could also block his legislative plans.
The President’s promise to build a wall along the border with Mexico will probably be among the first casualty. Some might conclude that the expensive and impractical proposal was only ever intended as a populist vote grabber, and the President fully expected it to be voted down when the time came.
More significant might be a loss of control when it comes to the economy.
His hold on power has slipped, meaning no more tax cuts for big businesses, and threatened cuts to social security and healthcare may no longer be on the table.
What does this mean for the US economy?
This might look like a setback for Mr Trump, and the US economy – but the President may be able to turn it to his advantage. If the economy does not continue to thrive, he can point a finger at the lower house who are standing in the way of his policies. But will things continue to work out?
Currently, the US economy is enjoying rapid growth. There is falling unemployment as tax cuts boost small businesses and the policy of bringing jobs home to America works exactly as intended.
It would be a very brave Democratic representative that stands in the way. Of course, there are still issues such as the trade war with Beijing and protectionism that have populist appeal but make little economic sense. The President may be forced to ease back on these. But it could be that this is what he intended all along.
What does it mean for you?
If the President really has made some strategic moves which let him distance himself from his more extreme policies, the US economic revival could continue, and even be enhanced.
US investments could look even more attractive after last Tuesday’s elections. Certainly, the immediate reactions by global markets seemed positive.
To see if the President’s apparent losses could mean gains for you, call us at Continuum.
The value of investments can fall as well as rise and you may get back less than you invested.
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Sources:
bbc.co.uk – Mid-term elections: Democrats win House in setback for Trump – 7th November 2018
