Prospect of Trump pres­i­dency un­nerves com­pa­nies, econ­o­mists

Chronicle (Zimbabwe) - - Business -

THE prospect of a Don­ald Trump pres­i­dency un­nerves busi­ness­peo­ple and econ­o­mists who see him as a reck­less novice who might dis­rupt trade and a strug­gling global econ­omy.

Fi­nan­cial mar­kets sank yes­ter­day as Trump de­clared vic­tory fol­low­ing a cam­paign marked by fiery anti-for­eign rhetoric and prom­ises to tear up trade deals, re­strict im­mi­gra­tion and lock up po­lit­i­cal ri­vals.

Trump’s shift­ing and rad­i­cal po­si­tions on key is­sues and lack of de­tails such as who might be ap­pointed to Cab­i­net posts height­ened jit­ters by leav­ing many un­cer­tain about the di­rec­tion of the world’s big­gest econ­omy and mar­ket.

“We sim­ply can’t know what type of Pres­i­dent Trump will be,” said Paul Ash­worth, chief US econ­o­mist for Cap­i­tal Eco­nomics, in a re­port.

“Will he be the dem­a­gogue from the cam­paign trail, who threat­ened to lock up his po­lit­i­cal op­po­nents, pun­ish the me­dia, build bor­der walls and start a global trade war?” said Ash­ford. “Or is he ca­pa­ble of be­com­ing a states­man­like fig­ure who leads in a more mea­sured man­ner?”

Due to such un­cer­tainty, risks to global growth will rise as com­pa­nies wait to see what Wash­ing­ton does, said South Korea’s fi­nance min­is­ter, Yoo Il-ho, ac­cord­ing to a gov­ern­ment state­ment.

In a vic­tory speech, Trump was con­cil­ia­tory but pledged to put US in­ter­ests first. He gave no ad­di­tional de­tails about his plans.

“I want to tell the world com­mu­nity that while we will al­ways put Amer­ica’s in­ter­ests first, we will deal fairly with ev­ery­one. With ev­ery­one. All peo­ple and all other na­tions,” Trump said. “We will seek com­mon ground, not hos­til­ity. Part­ner­ship, not con­flict.”

Trump’s cam­paign tapped frus­tra­tion among Amer­i­can work­ers who feel hurt by glob­al­i­sa­tion and the loss of well-paid man­u­fac­tur­ing jobs.

The celebrity busi­ness­man threat­ened to pe­nalise US firms that shift jobs abroad.

Pro­pos­als in­clud­ing build­ing a wall along the Mex­i­can bor­der to block im­mi­gra­tion res­onated with work­ing class vot­ers who felt aban­doned by tra­di­tional lead­ers.

Trump’s suc­cess re­flects an eco­nomic anx­i­ety that gov­ern­ments of many na­tions need to heed, said James Zim­mer­man, chair­per­son of the Amer­i­can Cham­ber of Com­merce in China. He said sim­i­lar strains led to Bri­tain’s vote to leave the Euro­pean Union, the Arab Spring move­ment and other jar­ring po­lit­i­cal changes.

“Th­ese are con­cerns that global lead­er­ship must be aware of,” said Zim­mer­man.

Trump’s vic­tory was likely to lead to a shift in US Fed­eral Re­serve pol­icy.

The Fed had been thought all but cer­tain to hike in­ter­est rates at its next meet­ing in mid-De­cem­ber, re­flect­ing a strength­ened US econ­omy. But the un­cer­tainty gen­er­ated by a Trump vic­tory could prompt the Fed to wait.

An anal­y­sis in June by Moody’s An­a­lyt­ics said fully adopt­ing Trump’s pro­pos­als on taxes, trade, im­mi­gra­tion and gov­ern­ment spend­ing would slash US eco­nomic out­put and elim­i­nate 3.5 mil­lion jobs. It said the US econ­omy would be “iso­lated and di­min­ished”.

Other coun­tries also will suf­fer sim­i­lar losses if Trump makes good on prom­ises of a more ag­gres­sive ap­proach to­ward China, Ger­many, Ja­pan, South Korea and other trad­ing part­ners, econ­o­mists said.

In Ger­many, 1.5 mil­lion jobs de­pend on ex­ports to the United States, the coun­try’s big­gest trad­ing part­ner, said Cle­mens Fuest, pres­i­dent of the Ifo eco­nomic in­sti­tute in Mu­nich.

“If Trump can en­act the trade lim­its that he has an­nounced, the dam­age would be great,” said Fuest.

Trump can­not tear up ex­ist­ing trade deals, but con­clud­ing new ones “will be sig­nif­i­cantly more dif­fi­cult,” said Fuest.

US im­port bar­ri­ers could hit economies such as China and South Korea es­pe­cially hard as they strug­gle with slug­gish growth. China’s ex­ports in the first 10 months of this year fell by 7.7 per­cent from the same pe­riod of 2015 while its lat­est quar­ter eco­nomic growth of 6.7 per­cent is the low­est quar­terly level since the 2008 global cri­sis.

Ini­tia­tives such as the Trans-Pa­cific Part­ner­ship be­ing ne­go­ti­ated by the Obama ad­min­is­tra­tion with Asian gov­ern­ments are “as good as still­born,” said Eu­gene Tan, a professor at Sin­ga­pore Man­age­ment Uni­ver­sity.

“Based on his cam­paign rhetoric and prom­ises, he is off to a bad start in terms of en­gen­der­ing trust and con­fi­dence of US al­lies and part­ners in the re­gion,” Tan said.

Trump of­fered so few de­tails dur­ing the cam­paign that he left the im­pres­sion the White House would run on in­stinct. That has made many un­easy about the di­rec­tion of the world’s largest econ­omy and mar­ket.

“Trump ap­pears to have only a pass­ing grasp of pol­icy, so it is im­por­tant that he ap­points peo­ple with ex­pe­ri­ence,” said Ash­ford.

“This is where Trump’s run­ning mate, In­di­ana Gov­er­nor Mike Pence, could prove to be piv­otal.”

Oth­ers looked for a bright side to Trump’s pro­posed im­mi­gra­tion curbs.

South Korean tech firms might be able to lure for­eign work­ers away from Sil­i­con Val­ley if a Trump ad­min­is­tra­tion makes it harder to get visas, said Mar­cello Ahn, a fund man­ager for Quad In­vest­ment Man­age­ment in Seoul. — AFP

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