President Donald Trump has certainly changed the landscape of American politics. Scandals and the President’s capricious nature has led to a long list of high-profile firings, including Sally Yates, Michael Flynn, James Comey, Sean Spicer, Reince Priebus, and Anthony Scaramucci. Some factions in D.C. are calling for an additional dismissal — that of the President himself.
What sort of impact would the impeachment of Trump have on U.S.-Israel trade? What can you do to better protect your finances, given this political uncertainty?
In the short term, an impeachment would dramatically affect the U.S. economy, and by extension, the Israeli economy. In May, Bridgewater Associates, the world’s top hedge fund, estimated that U.S. equities would drop by 11 percent and gold prices would rise by 14 percent from an impeachment. As a result, global economic shrinkage would ensue. Domestically, $2.3 trillion would be wiped off the S&P 500. A weakened economy would result in reduced Israeli imports, and economic reform overseas would be stifled.
Political Stability = Economic Growth
The economies of the U.S. and Israel are inextricably linked. The free trade agreement between the nations, which has been in effect since 1985, has led to the bilateral trade that exceeds $45 billion each year. The majority of all multinational companies with R&D centers in Israel are from America.
The current political culture shapes government policy. If any political shifts threaten the status quo in regards to U.S.-Israel trade, the economies of both countries could suffer. Uncertainty can stifle economic growth. On the other hand, political stability leads to increased confidence from entrepreneurs and foreign investors, ultimately leading to more money for local businesses.
To understand the nature in which impeachment would change our trajectory in the long term, we need to analyze where Trump is headed now. While Trump has been a vocal proponent for peace in Israel, his isolationist rhetoric will likely have an impact on businesses, particularly when it comes to supporting diversity.
We already know that the President has had an impact on U.S.-Israel trade, and that he will continue to do so throughout his presidency. In late May, he expressed a desire to reduce the trade deficit; America is Israel’s largest export market, buying nearly 30 percent of all Israeli exports, while only making up 11 percent of their imports. He may plan to appoint a new Federal Reserve head who will raise interest rates, therefore reducing exports. This will ostensibly benefit the American economy, though it will weaken the unique economic bond between the two nations.
Impeachment may jettison these plans, leaving foreign policy to Vice President Mike Pence. Pence is praised in the media for having a pro-Israel record, and he attributes his support of the country to his Christian faith. However, he has his fair share of critics in the Jewish community; some of his views (such as his support for funds to persuade gays to “change their social behavior”) contradict mainstream Jewish views.
In financial terms, he has spoken against the Boycott, Divestment, and Sanctions (BDS) movement, a movement that many world leaders have labeled “anti-semitic.” Nevertheless, it is difficult to disentangle his current rhetoric with that of the Trump administration. Ultimately, the future of U.S.-Israel trade is contingent on whether Pence continues Trump’s policies or not.
Here are some of Pence’s proven stances on the economy:
- In the past, he supported the North American Free Trade Agreement, the Central American Free Trade Agreement, and keeping the U.S. in the World Trade Organization. Trump seeks to renegotiate or back out of these agreements.
- He supports a flat federal tax and has cut state taxes drastically throughout his career.
- He has a history of opposing bank bailouts.
- He is against raising the minimum wage, in fear of “hurt(ing) the working poor.”
Tracking Political Shifts
There are clear reasons for businesses to keep a pulse on current political going-ons. An impeachment would have dramatic short-term ramifications, and potentially damaging long-term ones as well. While you are likely to encounter major political events through mainstream news channels, you should seek out information on the political situation in Israel as well. Be a part of the conversation; connect with other entrepreneurs through social media. Doing so can help you keep your ear to the ground, make smart economic decisions, and avoid falling victim to the political tide.