Big changes are coming to the Republicans. Donald Trump picking J.D. Vance as his running mate is proof enough. They’re moving away from free-market conservatism and embracing economic populism.
Are Republicans the new Democrats?
Obviously, Trump-Vance win would have massive implications for the U.S. economy. Their policies mix protectionism, populism, and a focus on working-class Americans. This could change things in many sectors.
So let’s break down what their plans could mean for the economy and also financial markets.
Trade battles and cutting taxes?
Trump’s trade battles were a big deal during his first term. Remember the tariffs on Chinese goods? It was a mess, with lots of disagreements within his team about how far to push it. Republican lawmakers also tried to balance things out.
Now, the party is more united around Trump’s anti-globalization and anti-immigration stance. This could make American businesses nervous about losing foreign markets and immigrant workers.
JD Vance is on board with Trump’s trade policies. He supports tariffs to protect American jobs and manufacturing. Sure the “America First” philosophy sounds a little bit okay in theory.
But economists warn it could lead to higher consumer prices and retaliatory tariffs from other countries. So, while it might protect some jobs, it will probably also hurt the economy that’s already struggling.
Trump’s 2017 tax cuts were huge, costing America $1.7 trillion. These cuts are gonna expire next year unless he wins and makes them permanent.
But here’s the thing, some Republicans think the cuts were too generous to the rich. There’s rumors about maybe even raising the corporate tax rate.
Donald John Trump. Credits: The Trump Campaign
Judging by his history, Vance is likely to support tax cuts, but with a twist. He wants them to benefit regular folks more than the wealthy. This could mean less focus on big corporations and more on middle-class families.
However, critics think this could increase the national debt and possibly lead to cuts in essential programs like Social Security and Medicare.
Will Corporate America be safe?
The Republicans’ support for Corporate America isn’t as strong as it used to be. People are angry at corporations, especially because of their progressive social goals.
A survey by FT-Michigan Ross showed Americans blame corporations more than politicians for their economic problems. Vance has been tough on Corporate America too. He supports antitrust policies that could put Big Tech in check.
Source: FT-Michigan Ross
He’s also joined forces with Democrats like Elizabeth Warren to push for clawing back executive pay when banks fail. This could make the big businesses nervous, but has clearly resonated with voters tired of corporate greed, as you can see on the survey.
Trump’s administration was all about rolling back regulations too, especially in the energy sector. If he wins again, expect more of the same.
They’ll likely roll back pollution and emission regulations to boost fossil fuel production. This could create jobs in traditional energy industries but anger environmentalists and worsen climate issues.
Senator Elizabeth Warren. Credits: CNBC
On the other hand, Vance supports tough antitrust policies. He’s also in favor of stricter regulations in some areas, like making banks more accountable. No idea how or if the two will find a middle ground regarding this. Remains to be seen.
Stocks and crypto?
Investors are already reacting to the possibility of a Trump win. The so-called “Trump trade” has boosted stock and crypto prices. Analysts think favorable policies under Trump will drive this optimism, despite the stock market’s sensitivity to political events.
And his public declaration of love for Bitcoin and crypto companies is expected to do a lot for the market if he wins, AND keeps his promises for crypto.
The Federal Reserve’s monetary policies will also play a big role. Expectations of interest rate cuts and better inflation are boosting investor confidence.
Headquarters of the Federal Reserve in Washington, D.C. Credits: AP
The increased government spending and tax cuts under Trump could make it harder for Powell and his team to manage inflation. Vance’s focus on protecting the working class is a huge change from traditional Republican views.
No doubt balancing protectionist measures with the need for economic growth and innovation will be a big challenge. If not handled well, the policies could end up hurting the very people they try to protect.
Both Vance and Trump have owned Bitcoin and accepted it as a form of payment. Trump has said, “Vote for me and I’ll keep Elizabeth Warren away from your Bitcoin.”
Donald Trump with Tyler and Cameron Winklevoss. Credits: Tyler Winklevoss
He has also said, “America must maintain its global dominance in crypto.” He said, too, “I want all of the remaining Bitcoins mined in America.”
And let’s not forget the promise he made to support crypto companies and pardon Ross Ulbricht, the founder of Silk Road. No one can say for sure that Trump will actually do what he says.
This is politics after all, but his survival of an assassination attempt did trigger an insane buying pressure in crypto markets and boosted Bitcoin by nearly 20% in under 48 hours.
