Opportunities for all!
If Donald Trump’s plans are carried out and do result in economic growth in the US, many other countries could benefit.
muchhas been made of the potential havoc US president-elect Donald Trump will wreak on the health of the global economy if he follows through on belligerent threats to slap massive tariffs on cheap imports and abandon global trade agreements that took years to negotiate.
His sharp criticism of China, Iran and Mexico, together with threats to eject hundreds of thousands of illegal US immigrants, support torture of terror suspects, and establish a registry for Muslim Americans have done little to soothe the nerves of world leaders concerned about geopolitical stability.
But US financial markets – and global commodity prices – have given Trump’s election an unequivocal thumbs-up, as players bet that his pledges to slash corporate and individual taxes and spend billions of dollars on infrastructure will spur economic growth in the country.
If this materialises, other countries should also benefit, through knock-on effects and through some of Trump’s controversial policies becoming the catalyst for ending a period of austerity imposed on many developed countries since the global financial crisis.
Some analysts believe the populist policies espoused by the bombastic business mogul-turned-president will prod sitting European leaders into loosening government purse strings to appease disgruntled voters, who may otherwise desert them in droves in elections in 2017.
That might be just what the world’s tepid economy needs, according to Gabriel Sterne, head of global macroeconomic research at Oxford Economics in the UK. “Trump is a bit of a beacon for the fiscal expansion which could spur global growth,” he says.
Like many other economists, politicians and business leaders, he is also fairly sure that many of Trump’s most disturbing remarks will end up being “more bluster than action”. There is some evidence of this already.
Peter Navarro, an economic advisor for Trump’s “transition team”, has said that tariffs are “not an end game but a negotiating tool” and insisted that Trump will approach trade issues “in a measured way”.
Trump’s threat to penalise big US companies for moving overseas to take advantage of lower costs – particularly cheap labour – can be viewed as a futile attempt to halt globalisation. But he does make some valid points.
Kimberly Amadeo, president of World Money Watch, says that while China requires American companies to set up factories to hire and train local workers before they can sell to its market, the US does not – and could easily follow suit.
Trump also plans to end a tax deferral on $5tr of corporate cash held abroad, and allow a one-time repatriation that would be taxed 10% – a deal which might help spur domestic investment.
He claims he will eliminate tax loopholes available to the very rich and to big corporations – a pledge which can be viewed with scepticism given his business status, but which he would certainly have the inside knowledge of to pull off.
Trump has put his reputed business acumen where his mouth is, declaring in an emphatic tweet on 6 December that costs for a pending $4bn order for the next generation of presidential aircraft from corporate giant Boeing were out of control. “Cancel order!” he tweeted.
While Trump appears to have inflated the estimated costs somewhat, The New York Times said his outburst marked the first time in decades that a US president had openly confronted the head of a big American company.
Although many of Trump’s cabinet appointments have fuelled concern over the defense and security policies of his new administration, he has made a few smart choices which appear to be at odds with his notorious lack of political correctness.
One of them is Nikki Haley, the daughter of Indian immigrants and governor of South Carolina, as the country’s UN ambassador – a key post in terms of presenting America’s face to the world.
Haley earned praise for her response to a mass shooting at a black church in South Carolina in 2015, when she called for the Confederate flag to be removed from the state capital. She was critical of Trump during his campaign and took issue with his call to ban Muslims from the country.
African countries are worried that Trump’s unhappiness with foreign aid and trade deals will affect the continent, particularly if it undermines the African Growth and Opportunity Act, which allows 38 sub-Saharan African countries to export products to the US duty-free.
But Kathy Davy, Africa portfolio manager at Ashburton Investments, says Agoa is unlikely to concern him as under the deal, non-oil and gas trade into the US amounts to just $4.5bn, and has not led to any significant job losses in the country.
Trump also went some way towards soothing ruffled feathers in China by making Iowa governor Terry Branstad, who has had cordial relations with Chinese President Xi Jinping for three decades, the US ambassador to China.
US president-elect Donald Trump speaks at a Victory Tour rally, on 8 December 2016 in Des Moines, Iowa.