Trump’s legal problems could be good for markets

President Trump is in mounting jeopardy as prosecutors link him to federal crimes and detail previously unknown connections with Russian officials. It doesn’t necessarily mean Trump will face impeachment, but it does mean legal challenges will dominate his next two years in office and probably damage Trump politically.

In normal times, political turmoil at the top of the U.S. government would not be good for financial markets. But in Trump’s case, legal vulnerability could force the president to moderate trade policies that are currently unnerving investors, providing relief to markets rather than stress.

Trump’s legal problems fall into three broad categories. The first involves campaign-finance violations. Federal prosecutors have now linked Trump with crimes involving the 2016 hush payments to two women Trump had affairs with. Trump’s former lawyer, Michael Cohen, pleaded guilty to campaign-finance crimes, among other things, for his role in those payments. And prosecutors say Cohen “acted in coordination with and at the direction of Individual-1.” Individual-1 is Trump. So prosecutors are alleging Trump committed the same crimes Cohen may go to jail for.

Prosecutors probably won’t charge Trump while he’s in office, and it may be unwise for House Democrats to try impeaching Trump for campaign-finance violations. Those are serious crimes, but to voters they might seem like technicalities not serious enough to end a presidency. Democrats seem to recall that Bill Clinton’s popularity rose in the late 1990s, after a Republican-controlled House impeached him for lying under oath and obstructing justice. Many voters felt the impeachment was politically motivated and never should have happened. The same could happen with Trump.

Possible legal troubles connected to Russia, business

Trump’s second big problem is the probe by special counsel Robert Mueller into Russian interference in the 2016 presidential elections. There’s still no public evidence that Trump himself conspired with Russians, which would be illegal. But Mueller has so far found that Russians had contacts with at least 14 people involved in Trump’s presidential campaign. And Trump was seeking business in Russia at the same time he was clinching the Republican presidential nomination in 2016, which suggests his unusually favorable views on Russia may have been aimed at winning business there. At a minimum, that’s a profound conflict of interest, and there could be crimes associated with it.

Trump may also face legal challenges related to tax evasion and other dodgy business practices that prosecutors uncover amid various probes. Again, there’s no direct public evidence of a crime at the moment, but Trump’s business has never been under the type of scrutiny it faces now. The New York Times, for instance, recently described how Trump and his family engaged in “overt fraud” to evade taxes, for decades. Trump insists he paid all required taxes, but prosecutors are now looking into tax evasion, too.