In his attempt to make America great again, Donald Trump will not only fail, but damage an already vulnerable world economy.
For the last 18 months, Trump has hounded the global political elite for creating a network of international trade deals, especially Obama’s Trans-Pacific Partnership, which he has sworn to reject as president. He believes it will strip hardworking Americans of jobs, but more realistically Trump’s rejection of TTP will ward off any potential investment from the Pacific Rim countries that could have spurred job growth. His refusal of tariff-free trade will also deprive Americans of affordable, high quality products from some of the largest and most skilled manufacturing powerhouses in Asia, a choice that will hit the poorest the hardest.
TTP was not just intended to reduce trade barriers to create a free trade zone, it was a political manoeuvre by the White House to weaken Beijing’s influence across the region and increase its own. If Trump keeps to his promise by abandoning TTP, he will undermine his own nation’s economic and political influence across Asia.
The president-elect’s distaste for trade deals does not stop there. Throughout his campaign, Trump scapegoated many sovereign states for his country’s problems, but none more than neighbouring Mexico, a strong economic partner of America asserted through the North American Free Trade Agreement.
Trump has denounced NAFTA for stealing the jobs from blue-collar workers and planting them across the southerly border, although he does seek to renegotiate NAFTA. If negotiations fall through, Trump has threatened to place tariffs as high as 35 per cent on Mexican products. Yet Trump would not be immune from the effects of leaving such a trade deal. In 2015 U.S exports to Mexico totalled $267 billion, so clearly Trump must recognise the importance of his partnership with Mexico in their shared agreement. If he fails to realise this, his tariff barrier approach risks causing the cost of living for consumers on either side of the border to escalate, as well as jeopardising the jobs of thousands of hard working Americans and Mexicans.
Mexico, however, still has the greatest to lose. Foreign direct investment from the US into Mexico totals over $100 billion, and the instability that Trump forces upon the Mexican economy creates an uncertain environment to invest in, and these investment flows could dry up and with them many jobs. In addition, if he is successful in deporting the suspected five million illegal Mexican immigrants living in America then Mexico’s largest source of foreign income, remittances, could plummet. By imposing his protectionist policies on Mexico, Trump will force its citizens, and even his own, down a path of rising costs and unemployment.
China, like Mexico, was another prominent target of Trump’s rhetoric in his bullish attempt to win votes. His policies on China range from labelling the country a currency manipulator to imposing a 45 per cent tariff on Chinese imports into the US. It is easy for Trump to point to China as the reason for America’s loss in manufacturing jobs, but he has purposefully ignored the full story in order to give people the answer they wanted to hear. Over the past two decades investment in automation has doubled the output per US manufacturing worker, and as advanced robotics continues to develop, inevitably firms will choose the reliable, faster, full 24 hour working robot over the late, tired and 12 hour restricted worker. His attitude of ignoring the challenges of automation are futile. Trump risks fines and legal battles from the WTO if he subjects China to tariff barriers. He will worsen the situation again for or his own citizens by increasing the cost of living and scaring off those all-important investors.
Considering that the US is the biggest single market for Chinese exports, accounting for about 20 per cent, the effect of a Trump presidency on China’s already slowing economy could really be detrimental. Therefore, let us not be naive and pretend Beijing would not retaliate with their own measures. A trade war that would break apart these countries economically, and more worryingly, politically. Trump’s words were enough to cause fear in the global economy as a presidential candidate, demonstrated by the market’s reaction to him winning the presidency, but now having him at the helm of the largest economy in the world could shipwreck the most advanced economies, including China.
In our own continent, Europe, the Trans-Atlantic Trade and Investment Partnership is now history, because of a combination of Trump’s protectionist rhetoric and protests against the deal across Europe. The risk for Europe, however, is political and not economic. The potential withdrawal from Nato and stronger relations with Russia will not make Trump popular among European leaders, but his victory also represents a victory for the populist movements growing across Europe. Supported by Brexit, his victory fuels the momentum for an AfD surge in the German Election and continues to drive a Marine Le Pen win in the French presidential election reflected in her latest polling as she surges to be one of the favourites; all adding to the political uncertainty faced in Europe.
As Trump’s appointments roll in, it looks more certain that his anti-globalisation ideology was not just to win votes, but that it will be the doctrine of his administration. Globalisation and its trade deals have been the backbone of the unprecedented global economic progress we have achieved, that still continues to pull the poorest out of poverty. Yes, the benefits of globalisation have not been shared with everyone, but with Trump as president of the largest superpower in the world, all meaningful discussion about how to share the rewards of globalisation fairly will be averted. Instead he will focus on jeopardising a movement that has resulted in the progress we share today. The only mechanism that will make poverty and global inequality a thing of the past. So, as Donald Trump looks inwards and shuts the door on the rest of the world, it is our moral duty to continue looking outwards, and continue to build on the progress that Trump will fight to eradicate.