In the Wake of Trump's Victory, Uncertainty

On 8 November 2016, 59 million US voters – just 30% of the electorate – selected Donald Trump as 45th President of the United States. Trump is a quintessential outsider, a real-estate magnate and reality television star whose appeal is based largely on his promise to upend the political establishment.

During his campaign, Trump decried the election process as "rigged" and also waged various attacks against the existing political and economic system. Trump has denounced the Federal Reserve’s interest rate policy, and has also personally maligned Fed Chair Janet Yellen. The consequences of Trump's victory for monetary policy are difficult to predict. Yellen may feel obliged to step down. However, it is an important moment for the Fed to demonstrate its independence.

Economic policy platform not entirely consistent

Trump’s economic policy platform is not entirely consistent. On the one hand, he is strongly pro-business: He has promised to extend spending on infrastructure projects and he also wants to lower taxes on the rich in order to boost economic growth. On the other hand, however, he courts market scepticism. His plans to restrict immigration and free trade would impair economic growth. Protectionist policies would not only harm the US, but Europe as well. The signing of the Transatlantic Trade and Investment Partnership (TTIP) now seems increasingly unlikely.

Budget experts have calculated that Trump's plans would increase the national debt, which already reached 107% of GDP in 2016, up from 64% in 2007. The current federal debt is considerable. However, the US has managed several times in the past to pay down this debt, thanks to strong economic growth.

Prior to the election, numerous prominent US economists spoke out against Donald Trump. They criticized his campaign rhetoric for undermining faith in public institutions. They also refuted many of his arguments empirically, including the claim that international trade destroys jobs while depressing wages, or that trade is a zero-sum game.

"The election battle in the US did not showcase the merits of democracy"

Trump's election marks the start of a new phase of uncertainty in American politics. Which election promises will he implement? Which of them can he implement? The progress achieved by Barack Obama in fighting climate change is likely to be undone, as Trump denies the existence of man-made global warming. Trump is likely to find many areas of common ground with the Republican dominated Congress, and not just for rolling back environmental regulations. The House and Senate are sure to support his plans for aggressive tax cuts. He will also find easy allies when it comes to scrapping the Affordable Care Act, otherwise known as "Obamacare."

The election battle in the US did not showcase the merits of democracy. Trump's often irresponsible claims were damaging to America's social and political institutions. However, America's system of "checks and balances" – the tripartite power division between Congress, the President, and the Supreme Court – is a stable mechanism, which is able to deal with a President such as Donald Trump.