Impact of Trump’s Impeachment on the Egyptian Economy

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U.S. President Donald Trump served Junk food for the national football team due to the government shutdown, the White House announced that Trump is personally paying for events with the national team, to be catered with everyone’s favorite junk food, because the staff of the White House is furloughed.

Apparently, the government shutdown could continue for an indefinite period or could last for years, as Trump said “As a candidate for president, I promised I would fix this crisis, and I intend to keep that promise one way or the other.”, which means that he is never backing off from his target to build the wall, “It’s the Democrats keeping everything closed” Trump tweeted, isn’t he seeing that he is a part of the ongoing crisis?

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Building a wall between U.S. and Mexico was one of Trump’s key promises when he was campaigning to become president. This idea divided the country, nevertheless made him won many supporters, now after two years in his presidency, he wants to fulfill his promise.

A wall at the border between U.S. and Mexico would be designed to prevent illegal immigration from Mexico to the U.S. Trump wants to build a 1,000-mile wall made out of steel to prevent people from crossing the US-Mexico border.

But is illegal immigration is the main reason behind building the wall?

The Washington Post published leaked transcripts from a private phone call between Trump and his Mexican counterpart, Enrique Peña in January 2017, telling him that Mexico must pay for a border wall between that country and the U.S. because of promises Trump made on the campaign trail. He also mentioned that the wall is more important as a symbol than as a national security project.

“I am just going to say that we are working it out,” Trump said. “Believe it or not, this is the least important thing that we are talking about, but politically this might be the most important”, however, Peña continued pushing back.

Building a wall of this size is going to cost a lot of money, originally he suggested that Mexico should pay for the wall but it was soon very clear that the Mexican government would not pay.

Now, Trump is appealing to his own government and therefore, to US taxpayers to pay for the wall, he estimates that he would need $5.6 billion to build a steel barrier across the border, but the appeal hasn’t been well received by the the Democrats, so the government it’s been forced to partially close and it’s likely it will stay partially closed until a solution to building the wall can be found.

The shutdown is now the longest in U.S. history, and there appears to be no end in sight. As Trump repeatedly declares he won’t reopen the government unless he gets funding for his border wall as Democrats are fiercely opposed and have rejected his request, also polls show that the U.S. citizens don’t agree with building the wall, but those who agree with the wall being built are working hard to make their opinions heard.

Shutting down the government wasn’t the optimal solution, as now the impeachment of Trump is being discussed by the Democrats.

In the first week of January 2019, the swearing-in of the new Congress was dominated by one word: impeachment.

Rashida Tlaib, a newly elected Democratic representative from Michigan, began her tenure in Congress by saying what most members of her party are merely thinking, which is promising to impeach Trump.

Trump responded by tweeting: “How do you impeach a president who has done nothing wrong?”

Being impeached doesn’t mean being kicked out of office. On the U.S. federal level, it’s a process whereby a simple majority vote in the House can accuse a civil official, including the president, of an ‘impeachable offense. That accusation would then move to the Senate, which would decide whether to convict the official.

There are almost certainly enough votes in the House to impeach Trump and almost certainly not enough votes in the Republican-controlled Senate to convict him. Even if the entire Democratic caucus voted to convict Trump, twenty Republican senators would need to join them to expel him from office. That’s an extraordinarily high barrier for Trump’s opponents to overcome.

Investors and businesses may have overlooked one big risk that could come out of Washington due to the possible impeachment of Trump, but history reveals that stock markets often perform better with a divided government. Between 1901 and 2017, the Dow Jones Industrial Average returned 10.1% annually in periods with divided government vs. 9% with one party in control.

When President Richard Nixon resigned in the 1970s and President Bill Clinton was impeached in the 1990s, the stock market took a nosedive. Nixon’s resignation exacerbated a bear market in stocks, which lasted for several years after he resigned in August 1974, but that was largely due to the oil embargo by the members of the organization of Arab Petroleum Exporting Countries which targeted at nations perceived as supporting Israel during the 1973 Arab-Israel war, U.S. was one of the initial nations that was targeted, in addition to rapidly rising inflation. Inflation, specifically the Core Consumer Price Index, increased from below 3% to more than 11%.

Nixon was the first, but he resigned in 1974 before impeachment proceedings could begin. Clinton was impeached by the House of Representatives in 1998 before being acquitted by the Senate in 1999. The market responds in both cases in two very different ways. In the 12 months leading up to Nixon’s resignation, the S&P 500 fell 23%, while in the 12 months leading up to Clinton’s impeachment, the S&P 500 gained 25%.

But some analysts said that definitely not Nixon’s fate that mattered to markets, that it was the global economic environment moving the markets, not politics.

“Definitely Trump’s impeachment will affect the Egyptian market” Said Senior Economist at Sigma Capital Holding, Eman Negm, to The Daily News Egypt adding that not only the Egyptian market that will be affected by the impeachment and the volatile political environment of the U.S., the whole global market will be affected as the U.S. is the world’s biggest economy by far, it represents 24% of the world economy.

Negm also mentioned that this volatility will lead to stop the reallocation by the asset managers and fund managers till they find how the situation will be stabilized politically wise.

The stock market is a part of a globalized economy and what happens in one economy is bound to affect others, if we look back through history we can see that every time the U.S. market falls it was followed by the fall of the global stock market, not just the Egyptian market.

However, analysts have different opinions about Trump’s impeachment and its impact on Egypt.

“Fears of slow economic growth due to U.S.-China trade war will come to an end if Trump got impeached and it will consequently have a positive impact on the growth outlook, not just Egypt, mainly because of economic growth in China,” said The Head of Research at Pharos Holding, Radwa El-Sway.

El-Swaify added that the Federal Reserve will probably then raise interest rates two times which is the expected scenario before holding on to rates, the scenario that Trump was rejecting, which will obviously have a negative impact initially on emerging market currencies before sentiment improves with the halt in rate rises in the U.S.

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