Will Donald Trump’s Trade Policies Cause Bitcoin to Soar?
At the 2016 Republican Convention, Donald Trump proclaimed that he was going to disentangle the U.S. from bad trade agreements. He confirmed his anti-globalism position when he said, “Americanism, not globalism will be our credo.” Furthermore, in an interview, he said that he might pull the U.S. back from its NATO commitments. Thus, some theorize, […]
At the 2016 Republican Convention, Donald Trump proclaimed that he was going to disentangle the U.S. from bad trade agreements. He confirmed his anti-globalism position when he said, “Americanism, not globalism will be our credo.” Furthermore, in an interview, he said that he might pull the U.S. back from its NATO commitments. Thus, some theorize, the U.S. would be walking away from the world. As CNN put it, Donald Trump has “made clear his campaign means an America absent from the world.”
Donald Trump Rejects Globalism
So, could the effects of the U.S. walking away from the world bear similarities to those caused by the U.K. breaking away from the European Union?
Possibly, if we consider that the effects of the Brexit vote have been fear and uncertainty.
As a matter of fact, Moody’s Analytics economists fear that Donald Trump economic policies would result in recession and the obliteration of millions of U.S. jobs.
How a Trump administration would implement the undoing of international agreements, and what the economic consequences would be, is unknown.
Specifically, regarding trade agreements, in his nomination speech Trump stated:
Our horrible trade agreements with China and many others will be totally renegotiated. That includes renegotiating NAFTA to get a much better deal for America — and we’ll walk away if we don’t get the deal that we want.
Brexit, Trump’s Trade Policies and Uncertainty
The specter of a U.K. absent from Europe has been harmful to the U.K., Europe, and the world. In effect, according to the IFM:
- “Brexit causes ‘substantial’ increase in economic, political, institutional uncertainty.
- Global forecast for 2017 cut by 0.1 percentage point, to 3.4 percent.
- And, If not for Brexit, global forecast would have been slightly higher.”
To disengage from Europe, the U.K. will first have to activate Article 50. But what will happen once Article 50 is activated is a mystery. As the Telegraph put it, “No state has left the European Union before, and the rules for exit — contained in Article 50 of the Treaty of Lisbon — are brief.” And, the Center for Strategic and International Studies warns, “In many respects, the triggering of Article 50 will be a leap into the unknown.”
Thus, having the Brexit experience as a point of reference, Trump’s trade policies, if implemented without thoughtfully considered, clearly formulated, and well-executed plans, might throw the U.S. into a climate of uncertainty and turbulence similar to the one caused by the fallout of the Brexit referendum.
We do not know to what extent Trump’s threats on trade and currency will affect global currencies. However, these threats make many observers nervous. According to the Wall Street Journal, “Donald Trump’s talk of hiking tariffs is spurring worries the U.S. could pull the world into a global trade war.”
Bitcoin is a Safe Haven
Uncertainty and chaos drive people and investors to seek the protection of safe haven currencies, as we saw in the Brexit aftermath. For example, the pound plunged to a 31-year low, while the Chinese Central Bank continues to depreciate the yuan. And, Bitcoin became stronger.
This phenomenon was again confirmed during the recent political crisis in Turkey, which caused the Turkish Lira to depreciate, pushing people to protect their wealth in the safe heaven offered by Bitcoin.
So, depending on the outcome of the 2016 U.S. presidential elections, we might enter a period of global uncertainty. However, the good news is that during periods of uncertainty and turbulence, not only does Bitcoin tend to rise but its validity as digital gold is further enhanced.
What impact do you think Trump’s trade policies would have on Bitcoin? Let us know in the comments below!
Images courtesy of Pixabay, Michael Vadon via Wikimedia Commons