Interview: Alberto Mingardi explains how Trump’s election will affect Europe

Trump’s election, love him or loathe him, has had repercussions on the economics in the US but Europe, and Switzerland, have been affected as well. Alberto Mingardi, who is part of the Executive Team of Institute Bruno Leoni, and who is also a contributor to main Italian newspapers like Il Sole 24 ore and La Stampa, explains in this interview what can be expected market-wise, and also in the political field.

What do you think were the expectations in Europe before the US elections?

In Europe, no one expected the victory of Trump, but in this there is nothing extraordinary. If Europeans were to vote for the President of the United States, the last Republican would have been Eisenhower! European public opinion is generally more moved "to the left" than the American and this underlying prejudice is so strong and rooted that sometimes people end up confusing what one hopes (specifically, Hillary Clinton's victory) with what is "inevitable" from happening. I personally found really unpredictable how Trump won the Republican Party presidential primaries, because no one could have imagined that a political force would suffer such a "hostile takeover" almost without flinching. I have not found as unpredictable the Trump victory in November. Neither candidate was especially loved by the Americans, but Hillary was also affected by the lack of popularity of Barack Obama – in America, not in European newspapers – of whom her presidency would have been a continuation.

Did you find, after Trump’s election any changes, particularly in the markets’ behavior?

The markets have gone very quickly from considering Trump’s victory an advance of the end of the world to an exuberance that not always is rational. Before the elections, the attention of analysts had focused above all on his approach to international free trade and trade policies. Hence, the pessimism. After the elections, the fact that Trump is also offering very "pro-business policies", like deregulation (which are "pro-business" but also "pro-market"), as well as public investment and incentives, is being watched carefully and with interest. These might not be good to the market, but they can be good for the health of some players and thus enthuse stock traders.

What do you think the economical impact can be, in the coming months, in a positive or negative way, looking at Europe?

It really depends on what Trump will be able to do. In general, this president has little interest and even less sympathy for Europe. He does not actively work to weaken the European Union but will offer a cushion for those who decide to jump ship: starting from England.

But who thinks that Trump will undermine the EU's stability has not seen the elephant in the room. Over the next 12 months Netherlands, France, Germany, will run new election, and, at some point, even Italy. The "populists" who can break the EU are not in America or England, but in these countries. What if Marine Le Pen won the elections with a program that aims avowedly to exit both the EU and NATO (a traditional Gaullist position, even before that of the extreme right)? What if Merkel is weakened heavily in Germany?

If we look at the merits of the economic policies, the most important thing will be to see if Trump’s deregulation programme will work, and with what effects on growth. For years, the word deregulation was prohibited in the political vocabulary of the Europeans. But in the eighties Reagan and Thatcher successfully caught the attention with some policies like privatization which were later also adopted by governments with very different ideological imprint. A successful deregulation in America may force Europeans to moderate their worship of regulations.

Do you think that Switzerland, in particular, has been particularly affected by this election? or is this market less affected by foreign influences?

Switzerland is a country that has a stronger and more run-in institutional system than most. The good governance of the federal government today makes it an attractive country for businesses and with much higher living standards than neighbouring countries. It is known that Switzerland did not have a good relationship with the United States in recent years. And it will be interesting to see if there will be changes, with a Republican president.

Which ones, among Trump's decisions, could have a bigger impact in Europe?

I mentioned the importance of deregulation. But we must always remember that in politics we tend to copy the worst and not the best. Trump’s idea of a neo-mercantilism, the "America first" cry was electorally rewarding but does not deal with a complex world such as ours, in which (and thankfully) the supply chain is also articulated at the international level. We do not exchange only finished products, but also "things needed to do other things." No exporters nor importers  are only such.

But these is an extremely complex reasoning for the electorate, especially when the difficulties and the perception of being worse off than before triggers a search for magic wands. Trump's victory strengthens those in Europe who are very active in the marketing of simple and nationalist flavour solutions.