Will America's Biggest Gamble Pay Off?
By Sreenivasa Rao Dasari
It is the season of surprises. As if the surgical strike on black money in India was not enough Donald Trump to the surprise of many was today elected the 45th President of the United States. While Trump was (surprisingly) presidential in his victory speech, his win sent tremors through the financial markets across the globe. The possible impact of a Trump presidency, if he remains true to his campaign promises, could change the world of trade.
India-US: Trump during his campaign had said “India will have a true friend in White House” if he is elected President. Richard Verma, US Ambassador to India in a statement after the results were announced said,"The US-India relationship is vitally important, it is bipartisan, and it is only growing stronger. Here’s to another four years of robust US-India Dosti." We will wait and see how the ‘dosti’ evolves.
India’s IT industry: The Indian IT industry has tried to put up a brave face, by mentioning that the IT industry constitutes only 20% of H1B visas, but that statement brings to fore the industry’s fears of Trumps anti-immigration stance.
Oil Prices: Trump does not believe in Climate Change. So we may see a US that no longer pushes clean energy and is back to the ‘drill baby drill’ mode. Add to that his stance on the Middle-East and you are looking at a volatile crude market. A fragile US economy will push down oil and commodity prices further.
US-China: Trump has been openly anti-China in his campaign speeches, and promised to bring back manufacturing jobs to the US. But will businessman Trump allow politician Trump to forego a cheap manufacturing location? Nobel laureate Joseph Stiglitz, has said that the US economy would be a big loser if Donald Trump imposes new tariffs on imports from China. Stiglitz also forecasts a possible trade war, a correction in US living standards and job loss.
Trading Partners: If Trump follows up on his rhetoric of relooking the NAFTA, cancelling the TPP and reviewing all other trade pacts, the US may one fine day wake up to find itself without a single major partner. How will that work for the US economy? Not well is our guess. Trump may not realise but the axis of trade has shifted to the east and US is no longer the economic power that it once was.
Financial Markets: Wall Street was stunned at Trump's triumph. The doubts on possible interest rate hike cast a shadow over the stock markets. European shares were down less than one percent. US stock futures were pointing to a drop of around two percent for Wall Street.
MSCI's broadest index of Asia-Pacific stocks outside Japan ended down 2.3 percent and the Nikkei in Tokyo closing down 5.4 percent. This is just the beginning. If Trump, the president, tweets new financial plans during another of his 3 am meltdown, we may have a global financial crisis in hand.
Middle East: Trump drew the flak from the Islamic world after he said that he would impose a ban on Muslims entering the US. Trump has also vowed to be 'neutral' in negotiations between Israelis and Palestinians, which is considered to be a major break from long-standing US foreign policy favouring Israel. And that could make Trump's rise bittersweet to Muslims. Will it also bring a semblance of stability to trade in the Middle East?
US-Europe: Many European leaders have been open about their dislike for Trump. And Trump has reciprocated the same. The EU still remains one of the America’s most important partners, and it remains to be seen how EU-US trade performs under the new regime, with TPP no longer on the table. Trump though was a supporter of Brexit and we may see a closer bond between UK and the US.
US-Russia: Trumps love for Putin had made the headlines during the campaign. And for both Russia it seems a Trump presidency is a blessing as he has talked about normalisation of relationships. Will Trump remove the sanctions on Russia? Will we see the emergence of Russia as a major trading partner for the US?
Only time will tell...