Trump Presidency likely to reach further instability. Macron and Le Pen prepare for debate as election heats up. UK council elections serve as prelude to snap election. All in The Week Ahead.
Trump Presidency likely to reach further instability
Last week, as the Trump administration approached its 100th day, Washington was roiled by several domestic and foreign policy missteps. Domestically, an executive order that would have halted federal funding for jurisdictions that fail to cooperate with federal authorities on illegal immigration — frequently referred to as sanctuary cities — was blocked by a judge in California. The Administration responded by threatening to break up the 9th Circuit Court of Appeals, even though the ruling did not come from the appellate court. On the heels of that ruling, the House of Representatives announced it would not hold a vote on the second attempt to substantially revise the Affordable Care Act, and the Trump’s administration announcement of a tax cut proposal was met with skepticism across parties as it was likely to expand the national debt by as much as $5 trillion. Internationally, the Administration threatened to withdraw from the North American Free Trade Agreement (NAFTA), which could have affected as many as 15 million jobs as U.S. companies began the painful work of unspinning North American value chains. This also led the value of the Mexican peso to fall at a highly accelerated rate; the President then changed his mind and decided to “renegotiate” the agreement. Additionally, he indicated he may scrap the U.S-Korea Free Trade Agreement (KORUS) if the South Korean government does not provide $1 billion to pay for the U.S. THAAD missile defense system. Naturally, the South Koreans are furious at the suggestion, and the timing right before the Koreans head to the polls is also poor. He has also indicated there is a chance of a “major, major conflict with North Korea.” All of this suggests the administration will continue to be highly unpredictable and has its sights set on major shakeups of the international trade and investment systems. These goals, and the manner in which they are pursued, will continue to present difficulties for businesses seeking to manage their political and economic risks.
Macron and Le Pen prepare for debate as election heats up
This Wednesday, En Marche presidential candidate Emmanuel Macron and National Front (FN) leader Marine Le Pen will hold their first one-on-one presidential debate. After successfully edging out both the Socialist and Republican candidates Hamon and Fillon, as well as leftist Melenchon, the two will likely discuss Europe, immigration, and France’s economic future. The campaigns have been marked by odd occurrences that may have made news but not necessarily changed minds. Last week, Macron planned on visiting a group of Whirlpool manufacturing workers on strike, leading Le Pen to outflank him by meeting with the strikers earlier in the day. However, her advantage may have slipped from that exchange when she was asked whether providing free coffee and pastries wasn’t a form of bribery and she appeared to suggest that that was “fake news.” Meanwhile, Marine Le Pen’s replacement as head of the FN, Jean-Francois Jalkh, stepped down less than 48 hours after his appointment after a 2000 interview came out that appeared to suggest the Nazis did not use Zyklon B to gas Jews during the Holocaust. Heading in to the last week of the campaign, Macron appears ahead 60%-40% on average. However, there are substantial questions over whether Fillon or Melenchon’s voters will even bother to vote; polls have shown that as many as 40% of those voters may not show up for a Macron-Le Pen election. The debate will provide Macron with an opportunity to show his gravitas and appeal to a broad swathe of the electorate, while Le Pen will need to move away from rhetorical bomb-throwing to gain 50% or more of the electorate without depressing turnout from her base.
UK council elections serve as prelude to snap election
This Thursday, council elections across the UK will open thousands of council seats held by the Conservatives, Labour, Lib Dems, Plaid Cymru, the SNP, UKIP, and the Greens. In addition, there will be several mayoral elections. Current projections expect the Labour Party to lose around 50 seats, with the pro-EU Lib Dems expected to make gains across England, Scotland, and Wales. UKIP seats remain a wild card: will former UKIP voters continue to vote for the party now that the Brexit vote has been successful, or will they return to traditional conservative parties like the Tories? With the heavy concentration on Scotland — only 34 English councils will be up for election, whereas all 32 of Scotland’s will be up — another big question is what position the SNP will emerge with after the election. Looking further ahead, will the SNP be able to maintain the vast majority of its MPs in Westminster when the snap elections arrive in June? Or will the Lib Dems be able to carve away a few seats in the Highlands and Lowland counties? Even though council control will not be able to shift national policies, any party that is able to make substantial gains will benefit from a short term burst in positive news coverage, which could help the party heading into the June elections.
The Week Ahead provides analytical foresight on the economic consequences of upcoming political developments. Covering a number of future occurrences across the globe, The Week Ahead presents a series of potential upside/downside risks, shedding light on how political decisions affect economic outcomes.
This edition of The Week Ahead was written by GRI Analyst Brian Daigle.
