Donald Trump: What could go wrong if he's re-elected president?Image: trapezoid
Trump’s tariffs could trigger an inflationary shock, and his mass deportations could trigger a recession – that’s the price Switzerland will pay.
Niklaus von Tobel/ch media
Donald Trump is likely to be re-elected as president of the world's largest economy next week, with the International Monetary Fund warning in a report of “negative shocks” from “uncertain policies of the newly elected administration”. There may actually be multiple Trump shocks.
As another colorful American billionaire explained, uncertainty about Trump's policies is a problem in itself. Mark Cuban is rich because he sold his company when it collapsed after the stock market crash. He became nationally famous because, as the owner of a famous basketball club, he often yelled at referees. Today, Cuban condemned Trump on all channels.
“How can a company be prepared for what he's going to say next if he doesn't know it?” Cuban asked in the interview. Having a minimum of rationality and reliability is crucial in politics. “But for him, we don't know where he's going to go next.”
For example, Tesla boss Elon Musk believes: “He is already the richest man in the world; he is already the richest man in the world.” Now he wants to have power beyond Trump. “Image: trapezoid
Trump is uncontrollable even to his billionaire colleagues, even though many arrogantly believe they are superior to him and can manipulate him. Tesla boss Elon Musk, for example, thinks: “He’s already the richest man in the world; he’s already the richest man in the world.” Now he wants to control Trump, who may soon become the world’s most powerful person Powerful people.
Trump seems to have a fixed point, though: He wants to raise tariffs, tariffs, tariffs, tariffs. He doesn't seem to know exactly how high it should be; he has given a lot of numbers, but they are certainly very high: 10%, 20% or 50% for all foreign goods, 60% for only Chinese goods.
Back to the Tariff Era of the 19th Century
An economics professor who specializes in U.S. trade policy told the Washington Post that this would be a “historic” breakthrough in today's free trade system. The United States will be isolated from China and Europe, and trade relations will return to the 19th century. This would be an “extremely powerful shock that will shake the United States in ways that are difficult to predict.”
However, as the New York Times writes, there are some estimates. If the tariff reaches 20%, the cost of living will rise sharply. A typical family is 4% poorer. That's not all: The U.S. is about to see high inflation again, after it seemed like it had just been defeated and the Federal Reserve lowered its key interest rate for the first time. Interest rates will rise again.
Even so, Trump’s impact is not over yet. The EU will have to impose tariffs on U.S. goods, even if it fuels its own inflation and forces the European Central Bank to raise its key interest rate. The newly repaired supply chain may collapse again, or even more countries follow the United States in raising tariffs. “The geopolitical consequences would be catastrophic,” writes trade economist Paul Krugman. Regardless, they are actually very difficult to predict.
“The geopolitical consequences would be catastrophic,” trade economist Paul Krugman wrote.Image source: EPA/ANA-MPA
Like other small countries, Switzerland must ensure that it can survive this chaos. Something that may also apply to this crisis: When the global economy declines, the Swiss franc appreciates. As the new president of the Swiss National Bank, Martin Schlegel will have to significantly reduce key interest rates – Switzerland will once again have negative interest rates, as it did before the coronavirus crisis. The demand for real estate will be greater than it is now.
The KOF Center for Economic Research at ETH Zurich calculated the direct consequences that Trump's tariffs would have on Switzerland, that is, in the absence of the threat of global chaos. Therefore, Swiss GDP will fall by 0.2% as long as the US tariffs are in effect. This will harm the pharmaceutical industry in particular, but also manufacturers of machines, equipment, precision instruments, watches and food. As a result of Trump's tariffs, everyone living in Switzerland will see their income fall by CHF 200 per year.
The confusion does not faze Trump. He believed he knew better and could use tariffs to force foreign companies to build new factories. He doesn't care that he's starting a global trade war. Tariffs were his “favorite word,” “the best invention ever invented,” and, as the New York Times wrote, “for him, tariffs were the solution to almost every problem.”
Mass deportations will be more expensive than the last major financial crisis
Trump doesn’t care what the Europeans say about this; he doesn’t care. He didn't seem to think too much of them, anyway. He said in an interview that the trade deficit with them was “crazy”, adding: “Our allies exploit us more than our enemies.”
But the biggest risk in Trump's plan is the deportation of the 11 million people, or 3.3% of the population, currently living in the United States without legal documents. According to Bloomberg, Trump announced “the largest domestic mass deportations in American history” and justified it with explicit national socialist rhetoric, such as “pests” that “poison the blood of our country.”
Trump often speaks this way, and so do his allies, with his fans cheering him with signs that read: “Mass deportations now!” One think tank cared so much that it calculated the economic cost to the United States before the election — This will be ridiculously high.
To deport all 11 million people, the United States would have to spend a total of nearly $1 trillion over 11 years. The most expensive thing would be building hundreds or thousands of detention centers to arrest, detain and deport immigrants. With this money, the United States could build more than 40,000 schools or 2.9 million homes.
That's not all. The deportees disappeared as customers, taxpayers, and workers. In the construction industry, 12% of positions need to be filled, and in occupations such as painters, plasterers or roofers, this figure is as high as 30%. In a hotel or restaurant this is 7%, and in a home it accounts for 25% of all cleaning.
All told, the United States could lose 6.8% of its economy, or $1.7 trillion. That would be more expensive than the major financial crisis of 2007 to 2009, when Switzerland was forced to bail out major bank UBS Group AG. (aargauerzeitung.ch)
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