Asia might not realize it yet, but an American with bad hair whose name rhymes with “bump” is its worst nightmare.
And – worse – even if Donald Trump doesn’t become president of the United States, economies and markets in Asia will be the big losers in the next chapter of American politics.
Back in January, I wrote that a President Trump would be bad news for trade with China. “[Trump’s] argument goes that China is taking American jobs, not following the rules of international trade, stealing commercial secrets, and manipulating its currency to gain an economic advantage.” I wrote, “[This] could bring the two countries closer to a trade war, where they’d put tariffs or quotas on each other’s imports and exports.”
And yesterday, the Economic Intelligence Unit, which looks at how political risk affects investment, warned that Trump’s “hostile attitude to free trade, and alienation of Mexico and China in particular, could escalate rapidly into a trade war.”
This would also hurt the chances that the Trans-Pacific Partnership will be approved in the U.S. The TPP is a major trade deal between the U.S. and 11 other nations, including Japan, Australia, New Zealand, Malaysia, Singapore and Vietnam, to cut trade tariffs and reduce the costs of importing and exporting between members.
It’s about more than just a trade deal, though. A lot of the economic growth of Asia over the past few generations has been built on the back (and pocketbook) of the American consumer.
The economies of Asia – first Japan, then the so-called Asian tigers, then China, and now Vietnam and other emerging economies in the region – have been a major beneficiary of Americans’ endless hunger for things. But factories in Asia can only continue to feed the monster with cheap stuff if the U.S. allows it.
If tariffs in the U.S. on goods from Asia increase, the entire relationship breaks down. Production would (in time) shift either to other countries (presumably those favored by a President Trump) or to the U.S. – both of which would hurt Asia.
No one knows whether the more noisy threats by candidate Trump would become actual policy. The logistics and cost of moving production elsewhere, if it would no longer be economically viable in some parts of Asia, would be enormous. And politicians – in the U.S. and everywhere else – often don’t follow through on their campaign promises.
But in the U.S., it’s about more than one man’s threats. The rise in popularity of Donald Trump reflects an underlying discontent amongst a large number of Americans that isn’t going to go away. Whether or not there is a President Trump, he is creating space for a wave of opportunistic politicians to follow his path. The policies (however poorly defined) of candidate Trump – his attitudes towards Asia are relatively mild compared to other things he’s said – will in coming months become mainstream. And then it’s a matter of time before they’re enacted.
What does this mean for Asia? It’s going to have to find new sources of demand. Markets that are benefiting from American demand will need to diversify. Economic growth will likely slow. For now, there’s nothing to do… but this is something to keep a very close eye on, because everything stays the same – until everything changes, all of a sudden.