WAITING IS THE HARDEST PART
Across Asia, leaders and analysts are being kept guessing until US policy direction under Donald Trump becomes clearer
On the basis that dramatic changes in United States policy are unlikely for at least the next six months, analysts advise against pressing the panic button just yet over the Donald Trump presidency.
But there are fears that Asia could be kept in limbo, waiting for clear direction on the Trump administration’s policies. This could mean increased business and market uncertainty, weakened investment and slower growth in the region.
The US president-elect and his team will not be given the keys to the White House until he is sworn in on Jan 20.
Meanwhile, it does appear that the Trans-Pacific Partnership is dead in the water. And another trade deal, the trilateral North American Free Trade Agreement which came into effect in January 1994 between the US, Canada and Mexico, has a huge question mark over it.
Trump, once in office, might find that slapping tariffs on goods imported into America is a harder nut to crack.
Building a wall between Mexico and America looks doable — if he has the bricks and cement. However, if he throws out all the illegal immigrants, will he still have the people to build the wall?
While rebuilding America’s crumbling inner cities and broken road and rail transport systems is a noble ambition, where will the money come from? Will the private sector go along with Trump’s grand vision of the future?
“The big question is: Will we get Donald the campaigner or Donald the president?” said Simon Tay, chairman of the Singapore Institute of International Affairs.
“His winning speech gave us a hint that he may be a more conciliatory and pragmatic president, rather than the divisive person we saw during the campaign,” Tay told China Daily.
“During the campaign he said (Hillary) Clinton should be in jail. In his speech he praised her service to the country. But there are other things he said which he simply can’t walk away from, such as the TransPacific Partnership … that’s off the table now,” Tay said.
“We could be getting ourselves worked up too much,” said Charles Miller from the School of Politics and International Relations at the Australian National University in Canberra.
“Perhaps Trump will just be like Arnold Schwarzenegger, a celebrity politician who just wanted to be popular and ended up being quite moderate,” Miller said.
“On the other hand, we could see an emboldened Russia strike out against the Baltics while the US stands by; a trade war with China which would do real damage to the global economy; massive fiscal imbalances which would undermine the stability of the global economy, and worse.”
One of the headline-grabbing policies that Trump campaigned on was the imposition of tariffs on imports from China and Mexico. But this is easier said than done, some analysts say, because the political system in the US is not that straightforward.
“For many types of trade restrictions, he would need backing from the Republicans in Congress,” said Louis Kuijs, head of Asia economics at research house Oxford Economics, in Hong Kong.
He said putting trade curbs in place may not be easy for Trump given the Republican Party’s traditional stance in favor of free trade.
“Another factor is that most types of tariff would break World Trade Organization rules and China is highly likely to retaliate,” Kuijs said in a note to China Daily.
He said that given the complications involved in imposing tariffs, the Republican leadership in the House and Senate “will probably urge Trump to first focus on issues that all Republicans can agree on, such as tax cuts and deregulation for businesses”.
“The need for Trump to deliver something anti-Chinese in the face of these constraints makes it possible he will — as he promised to do — push the US Treasury to name China as a currency manipulator.”
But even that may be difficult, said Kuijs, as the People’s Bank of China, China’s central bank, recently spent a “sizable amount of reserves preventing the currency from depreciating more”.
He said Trump could also move on Chinese foreign direct investments in the US and the ongoing negotiations between the two countries on a bilateral investment treaty.
Trump gave warning to Japan and South Korea that they should start shouldering some more of the cost of stationing US troops in their countries.
South Korea could also face a problem with its exports of cars to the US should Trump move to impose tariffs on imports.
In a note on Nov 9, Nomura said 40 percent of all Hyundai and 50 percent of Kia sales in the US are imported from South Korea. But it observed that Kia had ramped up production at its Mexico plant in May.
In the Philippines, a former colony of the United States where relations have been strained in recent months, there is growing unease about future US investment in business process outsourcing, or BPO, firms.
The BPO sector is the biggest contributor to Philippine GDP, with the country reported last year to have overtaken India as the call center leader of the world.
Philippine President Rodrigo Duterte, who is often likened to Trump for his outspoken and crude remarks, recently signaled an alignment with China.
“We have a safety net which was foreseen by the president,” said socioeconomic planning secretary Ernesto Pernia on Nov 9.
“He foresaw that there’s this likelihood that Trump will become (US) president, so he decided to pivot to China,” the Philippine Star newspaper quoted Pernia as saying.
“He’s a clairvoyant ... We are now diversifying our friends so we don’t crash when the country you depend on is in trouble,” he told a briefing after addressing the Philippines Development Forum in Davao City in Mindanao.
Pernia said there is a strong possibility there could be lower investment coming from the US. And he singled out the BPO sector, which could be hit hardest as 75 percent of its income comes from US companies.
In Indonesia, President Joko Widodo said his country would continue its “mutually beneficial cooperation” with the US.
“Our relationship will still be good, particularly in trade. America is a major investor in Indonesia and I believe that will not change,” Joko told journalists.
The same is expected for Malaysia, where Prime Minister Najib Razak and Trump are said to be on good terms despite the latter’s anti-Muslim rhetoric during the campaign.
Thailand’s Fiscal Policy Office Deputy Director-General Warotai Kosolpisitkul told the Bangkok Post the Trump victory is a major “risk factor” not only for Thailand but for the global economy, as investments will be put on hold due to uncertainty over his economic policies.
Antonio Fatas, professor of economics at the business school INSEAD, said it is hard to predict what the consequences of a Trump administration will be, given “how little he has talked about policies”.
“And whenever he did, he kept presenting contradictory proposals,” Fatas told China Daily.
“There is no doubt there will be a serious setback to any proposals to sign new trade agreements. It is likely that some of what we have so far will be scaled back.” Fatas said this might force Asia to look for more trade integration internally, and less with the US.
As for regional growth, he said: “The risk to growth does not come from lack of new trade agreements. The risk comes from the possibility of a US recession which will likely have an effect on the global economy including Asia.”
In Fatas’ view, the repetition of a crisis like 2008 is possible, and “China has less room to do what it did in 2008-09 to isolate itself from the crisis”.
“But it is hard to predict what the consequences will be.”
Asia is waiting for clear direction on the policies of US president-elect Donald Trump’s administration.