What does the Trump presidency mean for global trade? As the dust starts to settle on what has been an astounding US election that is the question on everyone’s lips.
Let’s face it, the protectionist policies that helped propel The Donald’s vote in Middle America, will have far-reaching consequences for the global economy and global alliances if implemented.
When the world’s biggest department store starts changing the rules, we all need to take notice – and be alert to both the threats and the opportunities this might present.
There will be winners, and there will be losers and, whilst I seriously doubt he will successfully implement 45 per cent tariffs on China imports, you can bet current trade policies are in for a rethink. Threats to tear up Free Trade Agreements should not be taken lightly and proposed tariffs on imports to the US could trigger counter-measures from other nations.
On face value, it appears Trump’s trade policies will hit developing economies harder than they will developed economies. Aside from his rhetoric on China, Trump’s criticisms on NAFTA, for instance, target Mexico far more than Canada, and following June’s Brexit vote he said the UK would “always be at the front of the line” for a bilateral trade deal with the US.
The likely reality is that the bulk of Trump’s trade policies will be designed to protect and restore US manufacturing jobs from the competition of imports from cheap labour countries – thus appealing to his so called “deplorables” on a range of fronts. Protectionist policies focused around supporting and protecting first and second stage “traditional” manufacturing industries (utilising local inputs) could be logical targets for the incoming President – making political sense in the “heartland” whilst still being palatable to 5th avenue.
The potential for other nations to implement retaliatory trade measures against a protectionist Trump is no doubt already being “war gamed” by government’s around the world.
Resultant shifts in trade flows could provide serious windfalls for specific industries in some countries and Australia and New Zealand are arguably in the box seat in the Asia Pacific region – at least from a trade perspective. We have seen this previously in mini trade wars fought around commodities such as beef.
Currency gyrations will be somewhat more unpredictable – after all, who would have picked an appreciation in the US dollar in the event of Trump’s ascendancy? That said, for the same reasons as outlined above, we probably should have guessed that the hardest hit currencies in the wake of the US election result have been in developing economies that trade heavily with the USA. For example, the Brazilian real and the Mexican peso.
The reality is that even before you start looking at the potential global security implications (and potential shifts in alliances) associated with a Trump presidency, possible shifts in trade flows could have substantial impacts on the current world order.
There will be winners and losers as there always are in international trade.