Coronavirus politics: Which way will Trump lean?

Coronavirus politics: Which way will Trump lean?
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Whenever there is a major issue like the coronavirus, politics always enter the picture. In some ways, it has already been happening, but now that the peak is passing in many parts of the world, it could get even worse.

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Coronavirus politics

In his " Greed and Fear" report last week, Jefferies analyst Christopher Wood said now that the peak of COVID-19 infections is passing in Western Europe this month and later in the U.S., the political blame game will rise. He said the first political issue will be a focus on management of the crisis, and the second will be who was to blame for it. Both issues have entered the coronavirus narrative in politics.

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Wood added that the presidential election is only six and a half months away, which is why the politicization of COVID-19 will be especially intense in the U.S. He believes that after initially downplaying the health threat, President Donald Trump "has got his mojo back." He also agrees with Trump's push to get economic activity going again as soon as possible, and he expects progress to be made in this area by the end of the second quarter.

Wood explained that as the economic hardship gets more and more severe, so will the pushback against lockdowns, especially if fear of COVID-19 recedes at the same time. He believes most will begin to agree that lockdowns are "quintessentially un-American." He also noted that Trump wasn't the only one who downplayed the risk of the coronavirus. Even presidential health advisor Dr. Anthony Fauci downplayed its impact on the U.S. in January.

He added that the Democrats are on weak ground because while the virus was raging in China in January, they were focused on "the impeachment circus, which now looks an even more distant memory than Greta Thunberg."

Getting the economy moving again

Wood believes Trump has enough months left before the election to get the economy moving again. However, he notes that the president must be careful with being aligned with certain monetary and fiscal policies "that can be linked to bailing out fat cats" like the private equity industry.

He added that Main Street's revulsion of the 2008 Wall Street bailouts was one of the reasons Trump was elected, although he doesn't believe it was the main driver. Aside from the "crooked Hillary" narrative, Trump also campaigned to bring manufacturing jobs back to the U.S. He said COVID-19 has politicized the China issue again.

He added that there are elements on both the Republican and Democratic sides that see China as the enemy. Wood again reminded readers of the allegations that the coronavirus came from a lab in Wuhan and allegations about Beijing covering up the virus in January. Thus, he expects many politicians to argue that China should be held accountable in the upcoming U.S. presidential and congressional elections.

Dealing with China

Wood also noted that Trump faces a bit of a dilemma in dealing with China. He pointed out that Trump is still a businessman. Thus, he faces a choice between negotiating a phase two of the trade agreement with China and focusing attention on Beijing's potential blame in the coronavirus pandemic.

However, that isn't the only problem. The coronavirus pandemic has highlighted problems with the "just in time" manufacturing model, which has focused supply chains in China. He believes talk will turn to diversifying manufacturing out of China, a continuation of the trend that was already underway due to the tariffs that emerged as part of the trade war between the U.S. and China. A related issue will be to end U.S. dependence on medications manufactured in China

Whatever Trump decides to do, Wood said he will still "have to contend with those calling for China's blood." He said Trump will have to choose between campaigning on his trade deal as a win or declaring China an enemy and campaigning on the "China bashing theme."

Wood believes Trump will choose to champion his trade deal "in the context of a recovering American economy," although he will have to "make some gestures to the 'China is the enemy crowd.'" He called the move to stop funding to the World Health Organization "an easy win." Another easy win would be dealing with the issue of imported medications.

He adds that it's important to note that Trump isn't personally anti-China, and he believes the president genuinely respects Chinese President Xi Jinping.

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