The much talked-about US election is finally over. Republican Donald Trump is now the President of the United States.
Across the world, leaders and policy experts are struggling to form a coherent worldview from the President-elect’s often-conflicting pronouncements and the ensuing impact on their respective economies.
As of now, the one thing that is certain of Trump’s presidential win is the uncertainty that it brings to the financial markets, and that such effects will inevitably spill over to the wallets of the everyday man and woman living in and outside of America.
Here are some key points to consider:
Consumers could be paying more for goods from “America First” policies
“Putting America First – and not globalism – will keep jobs and wealth in America.”
Much of Trump’s campaign was founded on his ability to create jobs and economic success for Americans. According to his website, Donaldjtrump.com, his vision includes:
- To create 25 million jobs over the next 10 years.
- Stop China from “stealing” jobs and renegotiate NAFTA (The North American Free Trade Agreement) to make America the best place in the world to do business.
- To reform tax code and tax policies to make it easier to hire, invest, build, grow, produce and manufacture in America, and an “America-First” trade policy.
In “making America great again”, Trump promises to “punish” American companies for outsourcing work, slap tariffs on certain foreign goods and renegotiate free-trade agreements.
A Trump administration would impose 35% on any US company that wants to fire its worker and outsource their jobs to another country, and shift its product back into the US.
Trump also hopes to solve the trade deficit with China by implementing 45% tariffs on Chinese goods to make them “stop stealing and to play by the rules”.
Obviously, higher tarriffs means consumers will have to pay more for imported goods and services.
But here’s the thing – if he replaced the low tariffs provided by NAFTA and World Trade Organisation rules with punitive tariffs on China, he could ignite a tit-for-tat trade war that would cause US exports to fall.
This is compounded by the fact that China is America’s third-largest export destination, standing at 7.6% of its total exports.
Further, for all his talk on safeguarding American jobs, the move to implement these tariffs could in fact, backfire on the American job market.
An economic model of Trump’s proposals, prepared by Moody’s Analytics at the request of The Washington Post, suggests that if Trump levied his proposed tariffs and affected countries retaliated with tariffs of their own, the US would fall into recession too and up to four million American workers would lose their jobs.
The model also suggests that another three million possible jobs would not be created if the country fell into a trade-induced downturn.
The effects would also ripple through production networks across Asia, killing jobs and knocking confidence in the region. Either way, Singapore and Singapoereans seem to be at the losing end of the US-China scuffle.
A US-China trade war could put your rice bowls at stake
Political and economic observers are of the opinion that a Trump victory may bring uncertainty to the US-Singapore bilateral relationship that could threaten the looming recession already felt in the city-state.
This could mean greater market volatility, plunging interest rates and profits, more job cuts and higher unemployment rates.
At a recent campaign rally in Florida, Trump claims that countries like Singapore, China, India and Mexico are stealing jobs from Americans.
“We are living through the greatest jobs theft in the history of the world. There’s never been a country that’s lost jobs like we do, so stupidly, so easy to solve,” he told supporters at the campaign.
Trump said Goodrich Lighting Systems laid off 255 workers and moved jobs to India, while Baxter Health Care Corporation laid off 199 workers and moved its jobs to Singapore. He added he would immediately stop the “job-killing” Trans-Pacific Partnership (TPP), saying it was a disaster in the making.
The US is one of Singapore’s biggest trade allies. Scrapping the TPP would do the city-state no favours and could result in slower growth across Asia as exports and investments weaken.
At the other side of the coin, aggressive US trade policy could result in a slowdown in China’s growth and a loss of manufacturing jobs. Singapore could get hit as a result as China is one of the republic’s largest exporting and importing nation, so a slowdown in China would naturally have an impact on Singapore’s domestic growth.
What you need to do to protect your finances
As financial markets shift towards periods of volatility, it would be wise to start thinking about establishing a financial plan and clear goals to safeguard your capital from the ravages of economic downturns.
When it comes to growing and safeguarding your money, the earlier the start, the better, and the work you embark on today will set you en route a brighter and more secure financial future.