Uncertainty and the United States’ election effect on the economy: some thoughts and empirical illustrations

ABSTRACT

This study discusses the general impact of Donald Trump’s election on the US and European economies as well as the effect of this political news on financial markets. To this end, we discuss different hypotheses from a theoretical view and empirically illustrate these thoughts when possible. Our analysis suggests that while the expected Trump measures might boost the US economy in the short term, these actions would have negative long-term consequences in the United States. Further, this new US policy will affect European economies and destabilize financial markets while increasing uncertainty, which could constrain growth and increase the downside risk.

KEYWORDS:

• Trump effect
• US economy
• uncertainty

JEL:

• A1
• G1
• K1

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ We highlight a few economic measures here; more details are available at https://www.donaldjtrump.com.

² However, such action might have dramatic effects on the US labour market, so the US Congress can reject it.

³ France spends about 1.78% of GDP on defence.

⁴ According to the World Bank, US exports represented 12.6% of world trade versus 15% for European countries in 2015. This does not include intra-community exports.