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.

Finweek English Edition - - THE OPTIMIST’S GUIDE: TRUMP - By Mariam Isa ed­i­to­rial@fin­week.co.za

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.

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