WENATCHEE, Wash. — Chances are 75% that the U.S.-Mexico-Canada Agreement will pass Congress before the end of the year and President Trump will be impeached in the House but “relatively quickly” exonerated in the Senate, a former Trump administration market analyst says.
“The president will get impeached, but unless there’s a smoking gun or he’s found holding a knife with a dead body and sitting on a pile of cocaine, there is no way he will be convicted in the Senate,” Andrew Busch, former chief market intelligence officer at the U.S. Commodity Futures Trading Commission, said at the Washington State Tree Fruit Association annual meeting Dec. 9.
He also said economic growth will slow and that the U.S. won’t maintain 3% Gross Domestic Product growth levels.
Busch directed a team of 30 researchers on financial markets for the administration in 2017. He said the stock market has not reacted to impeachment efforts because it believes “it’s Bill Clinton all over again.” In other words, he won’t be convicted in the Senate, Busch said.
Whether Trump or a Democrat wins the presidency in 2020, the era of free trade is over, Busch said.
More bilateral deals will occur instead of anything like the Trans-Pacific Partnership, markets won’t shrink but won’t be as robust and “removing Trump won’t help you,” he said.
“Every 2020 Democratic candidate is more like-minded with our president on trade than any issue. We’re entering new policy on trade. It’s not good. We will have trade but it will be volatile,” Busch said.
Democratic candidates want to “re-regulate everything in agriculture” such as returning to the Waters of the U.S. rule and have big spending plans, which mean big taxes, he said.
“It’s not just the wealth tax. They want to change the inheritance tax (threshold) from $11 million back down to $675,000 and at a 55% rate,” he said.
On the flip side, Democrats want to massively spend to push broadband into rural areas, which would be “fantastic” and some of them want to focus on good technology, he said.
Noting the International Monetary Fund has predicted 47 recessions since 1988 that never happened, Busch said he developed a new economic model while at the CFTC. He calls it the opportunity money model and says a key ingredient is studying popular stories and how they affect economic outcomes.
For example, stories about the fear of genetically modified food have driven dramatic growth in organic food.
Federal Reserve policy, U.S. domestic policy and technology “are the three big stories driving the economy,” Busch said, adding that he added gravitational pull.
All three pulling in the same direction in 2017 led to “spectacular recovery” after years of not just “sand” but “boulders” in the gears of the economy from Obama’s Affordable Care Act and Dodd-Frank Wall Street reform, he said.
But then the Fed began quantitative tightening, raising interest rates to prevent inflation, which created uncertainty on the cost of capital and tariffs “cut off at the knees good work that was being done,” he said.
After a partial government shutdown late in 2018, the Fed paused on raising interest rates, Trump backed off tariffs and markets rallied more than 20% in the first four months of the year, Busch said.
“That’s a lot of volatility,” he said.
Fed policy remains positive but domestic policy less so with new tariffs on China expected soon, he said. Intellectual property, cyber security and human rights of Hong Kong and muslims in China make it hard to get a trade deal with China, he said, as “the world becomes bifurcated between the U.S. and China.”
Technology replaces inefficiencies and drives down inflation, which reduces the ability to pay back debt with cheaper dollars, Busch said, warning growers to be careful about “loading up” on debt.