It’s still unlikely President Trump will resign or be forced from office before his first term ends in 2021. But the odds have risen, given the recent guilty plea by his former lawyer, Michael Cohen, and a guilty verdict in the trial of his former campaign manager, Paul Manafort.
Cohen may pose the larger risk to Trump, since he knows the inner workings of the family firm, the Trump Organization, along with many details relating to the 2016 Trump campaign. Manafort is further from Trump’s inner circle, but he did run the presidential campaign for five months, including the period of time when Trump’s son and others met with representatives of the Russian government. It’s not clear either man will dish dirt to special prosecutor Robert Mueller, who’s investigating possible crimes related to the 2016 election. But the risk to Trump has intensified nonetheless.
So what if Trump leaves office, and Vice President Mike Pence takes his place? That would obviously be a tumultuous political development. But once the dust settles, Pence could turn out to be better for markets and the economy than Trump.
If Trump leaves office abruptly, it would probably push markets down. “The initial impact of that hypothetical would be a fairly significant hard stop on the psychology behind the rally we’ve seen in U.S. equities,” says Peter Kenny, senior market strategist for Global Markets Advisory Group.
But an initial pullback might be the worst of it, as long as the economy remains strong – and markets would probably find their footing quickly. Pence might even be a more stabilizing economic force than Trump, because he favors conventional policies rather than the economic nationalism that has become a Trump hallmark.
Pence is more of an establishment Republican
Pence is more of an establishment Republican than Trump. “He would align more with free trade groups, like the Chamber of Commerce Republicans,” says Greg Valliere of Horizon Investments. “He’d cool off the Trump trade wars.” Pence would probably make nice with Canada and Mexico, quickly wrapping up renegotiations of the North American Free Trade Agreement.
He’d probably bury the hatchet with Europe as well, perhaps modifying or ending altogether the new tariffs on steel and aluminum imports Trump has imposed. If that happened, several foreign countries that have imposed retaliatory tariffs on U.S. exports would rescind those, too. Firms such as Harley-Davidson and Caterpillar, which are vulnerable to Trump’s trade wars, would benefit, as would many smaller operators.
China is a different story. There’s more agreement among business groups and both political parties that China cheats on trade, steals other nations’ intellectual property and imposes unfair barriers to keep foreign firms on a tight leash in China. Pence might continue Trump’s hard line on China, but not necessarily with tariffs that raise prices here in America and threaten damage to the U.S. economy. Another way to confront China would be to push for changes at the World Trade Organization that would give the global trade regulator more leverage to penalize China for cheating.