Thursday, 10 November 2016

Trumponomics: What Does Trump’s Presidential Victory Mean For Global Economy?

Donald Trump's victory as the 45th America's President-elect creates new uncertainties for the global economy, say investors and economists.

A key strategy for President-elect Trump is to turn the US inward, both economically and politically. Many of his economic policies reflect a mercantilist perspective on economic development. This can be summed up as being the opposite to free trade.

"America’s neighbour to the south has most to lose from the new Republican president. Trump’s message to blue-collar voters in the rust-belt states was that US manufacturing jobs have migrated across the Rio Grande as a result of the North American Free Trade Agreement signed by Bill Clinton in the early 1990s. Trump has said that if he cannot renegotiate Nafta he will pull out of the free trade deal altogether. He has threatened to put a 35% tariff on some Mexican goods and pledged to close the “sweatshops in Mexico that undercut American workers”, according to the Guardian.

On Brexit, economists forecast that the UK growth will remain on course with 1.5% in 2017 and 2.5% in 2018.

European Commission President Jean-Claude Juncker has also called on Donald Trump to clearify his policy plan. “We would like to know how things will proceed with global trade policy,” Juncker said at a business event in Berlin, according to Reuters.

“We would like to know what intentions he has regarding the (Nato) alliance. We must know what climate policies he intends to pursue. This must be cleared up in the next few months.”

Juncker said he did not expect the trade deal between the United States and the European Union, currently being negotiated, to be finalised this year as previously planned.

In a report by Business Standard, "Trump's unpredictable pronouncements and opposition to free-trade agreements have made the real estate mogul unpopular with many financiers, who fear that he could disrupt global trade and damage geopolitical relationships."

Sean O'Grady of Independent in a report titled: "How President Donald Trump will wreck the world economy" said: "...The dollar, as has been indicated for these many past weeks, will take a tumble, but otherwise the world will, hopefully, wait to find out precisely what Trump has planned. If we’re very lucky, Trumponomics – tax cuts, deregulation and protectionism – will stimulate enterprise, investment and job creation, put trade relations with the rest of the world on a fairer, more sustainable, footing, and, as they say, make America great again.

"Trump is now in charge of nuclear weapons and the biggest armed forces in the world. Far more terrifying, though, and surprisingly little discussed, is that President Trump is in charge of economic weapons of mass destruction: the dollar, the world’s only reserve currency; the world’s largest economy (the US is about one third of global GDP), and its largest blocs of debt."

China may be affected with Trump's foreign policy as well. He had early said in his campaigns that he will instruct his Treasury secretary to label China a currency manipulator and bring cases against Beijing to the World Trade Organisation. He added that imposition of a 45% tariff on Chinese imports into the US to make it easier for American companies to compete will be considered too.

"We simply can't know what type of President Trump will be," said Paul Ashworth, chief U.S. economist for Capital Economics, in a report.

"Will he be the demagogue from the campaign trail, who threatened to lock up his political opponents, punish the media, build border walls and start a global trade war?" said Ashford. "Or is he capable of becoming a statesmanlike figure who leads in a more measured manner?"

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