TPPA likely to be dumped: Economists
PETALING JAYA: Donald Trump’s presidency is most likely to lead to the demise of the much-debated TransPacific Partnership Agreement (TPPA), a pledge made by the US president-elect during his campaign trail, economists said.
Trump, who will assume office on Jan 20, 2017, has said he will use all means available to get a “better deal” for the US from its trading partners, and this included opposing the TPPA.
AllianceDBS Research economist Manokaran Mottain said the TPPA may not materialise due to Trump’s strong opposition to the trade pact.
Without the participation of the US, the TPPA will fall through, as it accounts for 20% of global output.
Twelve countries – Australia, Brunei, Canada, Chile, Japan, Mexico, New Zealand, Peru, Singapore, the US, Vietnam and Malaysia – concluded the TPPA negotiations in Atlanta on Oct 5 2015 and signed the deal in Auckland on Feb 4 this year. Malaysia is committed to completing the ratification process of the trade pact by 2018 and has identified 18 laws that need to be amended.
Trump’s economic proposals fall into four broad categories: trade and immigration, tax reform, spending and regulatory change.
Nomura said while these proposals at face value could affect the US economy significantly, exactly how and to what degree they are implemented is an open question.
“That uncertainty stems from several factors, including the lack of specificity that has been provided, the lack of experience Trump has as a policymaker, who will serve in Trump’s administration and the extent to which Congress (part of the checks and balances in the US government) allows these policies to be enacted,” it noted.
Nomura said Trump has stated that he will begin deportation of illegal immigrants and establish strong protectionist trade policies in the first days of his presidency.
“Therefore, the Trump victory will likely hurt the economy before he even enters the White House, as businesses and households will likely delay or reduce spending in the face of high uncertainty,” it added.
Nomura said a Trump administration in the first year will boost economic growth with an expansionary fiscal policy, passing individual and corporate tax cuts and boosting infrastructure spending.
Even though a Trump presidency may affect trade between Malaysia and the US, Manokaran is of the view that it will not impact Malaysia’s gross domestic product significantly, with at least 4% growth in 2017. “If the US is not in the picture, we still have China to help our economy,” he said.
In 2015, North and South America accounted for 16.4% of total foreign direct investment in Malaysia.
Economists also believe the US Federal Reserve will stop short of raising interest ratse in December given the uncertainty in the markets in the wake of Trump’s win.
“Chances of raising interest rate are getting slimmer. It will probably be delayed to next year,” Manokaran said. - by Lee Weng Khuen