Asian markets have already seen some wild swings since Mr Trump’s election win.
Calling China a currency manipulator. Ripping up trade alliances and deals. Slapping tariffs on Chinese goods. Punishing American companies that outsource their jobs to Asia.
These promises got Mr Trump elected – but how many of them will turn into policies?
Whatever you might make of his personality or political ideologies, Mr Trump’s victory is an expression, as Lim Say Boon of DBS Bank put it, “of anger at the failure of globalisation”.
But globalisation has been very good for Asia’s economies, creating jobs for factory workers in the region who make products they sell to American consumers. It has boosted growth rates and raised the living standards of millions of people in emerging markets.
So with President Trump in the White House, will all of that stop? Let’s take a look at some of those campaign promises:
Fears over Mr Trump’s anti-trade rhetoric were reflected in the falling shares of major Asian exporters on Wednesday – from car makers to cargo firms to shipping companies. Not surprising given that on the campaign trail Mr Trump’s anti-trade rhetoric saw him “cancelling” the Trans Pacific Partnership agreement.
He has promised to bring jobs back to America. But is that realistic? Unlikely, say some traders in Asia.
“Globalisation has taken a certain grip on the world in such a way that reversing that process is almost impossible,” writes Nicholas Teo of KGI Securities. “No ‘protectionist’ government will last the ‘mile’, let alone 4 years in office, especially not one who is schooled in running businesses.”
If there’s one country in Asia that’s seen as most vulnerable to the Trump effect, it’s China. Will he call the country a currency manipulator, as he has promised to do so many times on the campaign trail? And will he follow through on his 45% tariff proposal for imports from China?
Again, unlikely says HSBC.
This “aggressive lose-lose” policy is likely to be toned down by the US Congress, according to the bank. It adds that the “silent majority” that elected Trump will not want to pay higher prices for goods imported from China, and China will have tools to retaliate too.
And what of Mr Trump’s claim that he will call China out?
Well, while research house Capital Economics says the President-elect will “waste little time in labelling China a currency manipulator”, it probably won’t make that much of a difference.
That’s because it “would have no direct consequences under US law, other than requiring the US Treasury to hold talks with China about currency policy, which it does anyway”.
It should be a simple two way street. The US entertainment industry wants access to the Chinese market. China wants to buy into the US entertainment industry. But politics is getting in the way.
Mr Trump’s anti-China rhetoric could prevent future Chinese investments of the kinds we’ve seen recently from going ahead in the future. And if there was a trade war between Beijing and Washington, the politburo may not take too kindly to Chinese tycoons swapping business cards and sipping cocktails with Hollywood’s high society.
But Beijing does hold a “Trump” card, so to speak. Hollywood wants more of its films screened in China, and negotiations are due to begin soon with the government about that. Mr Trump may find he has no choice but to allow China in, if he wants the same access afforded to US companies.
Mr Trump has promised to punish firms that send their jobs to Asia which could, as I’ve said before, hurt economies like the Philippines and India that have massive outsourcing industries.
But consider this: Narayana Murthy, the man known as the grandfather of India’s outsourcing sector and founder of Indian IT firm Infosys says he’s not worried.
“I am sure he will do what is in the best interest of America,” he said told Indian television channel CNBC TV-18. “What is in the best interest of America is for its corporations to succeed, for its corporations to create more jobs… to export more ….so I ‘m very positive.”
Mr Trump has made no secret of his disdain for the US Federal Reserve and its chairman Janet Yellen.
He accuses the Fed of keeping interest rates artificially low – and his election victory plunges the organisation into a new era of uncertainty, having threatened to intervene and strip away some of the Fed’s independence.
Interest rates are widely tipped to be raised next month although a short-term postponement is now looking a little more likely. That would be positive for Asian economies, who have more time to repay their US dollar denominated debt.
But it’s postponing the inevitable because eventually interest rates will go up, and the era of cheap money is on the way out.
Possibly my favourite quote on how markets are reacting comes from DBS which says “…markets are driven by 20-something traders, who react to headlines proffered by the major media corporations…”.
What do these 20-something traders do when delivered a surprise? They “run for cover”.
So don’t be surprised by the wild swings on the stock markets. Expect them.
But the hand-wringing and the soul-searching will end at some point, as the recovery on Asian markets today has shown. It always does.
The point is to focus not on what’s happening now but to figure out what this presidency means for the longer-term. There are plenty who think this election result is bad news for markets and the global economy. DBS’s take though is measured: “If a business-man [like Trump is] can do half as well at finding common ground as Washington has in the past 16 years, markets should make out just fine.”
I find it is hard to believe that any politician who is hoping to “double growth” in the US economy and “make America great again” could actually achieve those aims by doing what Mr Trump has promised. What is most likely is the pragmatist in the him will emerge, he’ll backtrack on some of the promises he’s made.
Case in point: Korean press is reporting that Mr Trump has telephoned South Korea’s president to reassure her the US’s existing alliance won’t be changed under his leadership, a threat he often made about military engagement in Asia while on the campaign trail.
My bet is this won’t be the last promise we see him reneging on, and that would be good for Asia.
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