US President Donald Trump unleashed a wave of global disruption on the way to the White House in 2016 — and now there are signs the anti-elite tide he surfed to the presidency could come back to hurt him.
Pandemonium in Washington, London, Paris and Berlin is breeding the kind of uncertainty that investors and markets abhor, just at the moment fears are growing of a global economic slowdown and an end to a years-long bull run.
Any sign that the economy is losing steam and that the decade of recovery from the most recent financial crisis is ebbing could come just at the wrong moment for the President, as he and his potential Democratic challengers spoil for battle ahead of his re-election campaign.
Disarray at home and abroad
Political disarray in the US and abroad is already triggering bearish sentiment and volatility that has seen US markets hand back most of their gains this year — no doubt to the chagrin of Trump who boasted repeatedly that his policies were the reason the Dow racked up a string of record highs.
Trump’s truce in a trade war with China also rattled investor confidence since it turned out to be less extensive than the “incredible” breakthrough he touted after talks with Chinese President Xi Jinping in Argentina.
Sources told CNN last month that Trump expressed disquiet about the market’s disappointed reaction to the deal and said the President was worried that prolonged losses on the markets could damage him politically.
But there is no sign that the political chaos ripping through some of the world’s most industrialized nations will ease any time soon. In fact, things are likely to get more chaotic and threaten consequential economic turbulence in 2019.
In the United States, the Trump presidency itself is under criminal suspicion as Robert Mueller’s probe threatens to consume all of the White House’s attention next year and undermine the political certainty that is the foundation of strong markets.
In France, President Emmanuel Macron’s hopes of overhauling the economy have taken a hit from violent protests over fuel tax hikes and he is fighting for his political life. A political meltdown is unfolding in Britain as Theresa May clings to power and tries to execute Brexit. The Prime Minister was forced to defer a vote in parliament on Monday to stave off a humiliating defeat for her deal with Brussels on the terms of Britain’s departure from the EU. And in Germany, Chancellor Angela Merkel — a pillar of stability for Europe for over a decade — is getting ready to leave the stage.
Each of these contained political dramas are distinct. But European leaders are wrestling with the kinds of revolts from voters who felt they were economically and political disenfranchised by globalization and vowed to tear up establishment political systems.
Those are similar political forces that helped Trump exploit dissatisfaction among rural, Midwestern and conservative voters in 2016.
“When you look at what is happening, you mention Macron, Brexit and think about the state of US politics — that populist revolt we think that is real, it’s powerful and it’s only just beginning,” Jared Woodward, global investment strategist at Bank of America Merrill Lynch told CNN International’s Richard Quest Monday.
“Until policymakers change those policies so that Main Street catches up to the gains in Wall Street, we think you can expect more of these kinds of results,” he said.
Flashing economic warnings signs
Political unrest is coming at a time of flashing red warning signs about the state of the global economy and could become problem for Trump if they develop into a genuine slowdown.
According to new data, Japan’s gross domestic product contracted by an annualized rate of 2.5% in the last quarter. The economy in China, slugging out a trade war with Trump’s America, just recorded its weakest quarterly growth number since the depths of the financial crisis in 2009. The Atlanta Federal Reserve last week trimmed its estimate of fourth-quarter economic growth in the US to 2.4%.
Adverse economic news could have dire political consequences for Trump as he heads into his re-election since his best argument for a second term is the robust US economy that has produced the lowest unemployment figures for 50 years.
The President’s handling of the economy is one of the few areas he ever approaches a majority of support in opinion polls. In a Quinnipiac University survey last month for instance, 53% of voters approved of his economic management and only 41% backed his performance overall.
Those numbers, and the fact that Trump made the reinvigoration of the economy in post-industrial states in the Midwest the key to his campaign in 2016 explain why he may be especially vulnerable if the economy slows.
The blame game
Trump has already seems worried, jabbing Federal Reserve Chairman Jerome Powell and reportedly expressing disappointment with his Treasury Secretary Steven Mnuchin.
The US President appears most concerned by the fact that the Fed, along with other global central banks has continued a tightening policy even as fears of a global economic downturn grow.
“Every time we do something great, he raises the interest rates,” Trump said in an interview with The Wall Street Journal last month, adding that Powell “almost looks like he’s happy raising interest rates.”
Given how much Trump has to lose from the instability wracking the rest of the world, it is perhaps counter-productive that he is rooting for revolts that he clearly believes are in the image of his own anti-elite political movement even when they threaten other allied leaders.
He took a weekend shot at Macron months after they hugged at a Washington summit, as the French President was forced to back down on a fuel tax increase designed to fight global warming that sparked the worst rioting in Paris for decades.
“The Paris Agreement isn’t working out so well for Paris. Protests and riots all over France. People do not want to pay large sums of money, much to third world countries (that are questionably run), in order to maybe protect the environment,” Trump tweeted.
Macron, under fierce political pressure was forced to address the French people on Monday, promising a rise in the minimum wage and the scrapping of new taxes on pensions.
Trump has also repeatedly undercut May’s tortuous effort to navigate Britain’s exit from the EU, most recently contradicting her claims that she could negotiate a trade deal with the US under the terms of her exit deal.
And his antipathy for Merkel, played out in several awkward photo ops and in tweets and speeches that criticized her policies on immigration, is well known.
So it’s ironic that some of Trump’s future political fate may hang on the capacity of such leaders to restore calm in their countries and the stability that could help the global economy and markets through a nervous period.