The Trump Presidency and Risks for Asia – CAA Weekly

Key highlights from the CAA Weekly Table

  • Global: The OECD composite leading indicators point to steady global growth, but this reviving global momentum will have to withstand the uncertainty caused by political developments in the US. The case for Fed tightening in December remains strong.
  • Asian politics: The provocative actions of the Localists in Hong Kong provoked China’s intervention which has increased worries over Hong Kong’s autonomy.
  • Asian economies: Central banks across Asia held their fire power. In China, weaknesses in foreign trade could be exacerbated by trade wars President-elect Trump follows through on his campaign rhetoric. Taiwan’s growing exports point to a positive near-term outlook for Asia’s export-driven economies. India’s surprise de-monetisation could see the economy slow in the short-term, but the bold move bodes well for India’s prospects.

A Trump presidency poses multiple risks for Asia

  • The election of Donald Trump as the President of the United States will weaken the US by deepening political rifts there as his policies will create strong backlashes, adding to ongoing controversies which will distract him from effective leadership. American exceptionalism will be diminished with many ill effects being visited on Asia.
  • Asia’s trade-driven economies have every reason to fear possible protectionist measures while his demand to reconfigure existing trade agreements and repudiate the TPP puts a halt to further trade integration. Geopolitical stability could also be compromised by American rivals such as North Korea testing the new and inexperienced President.
  • The biggest losers in Asia are small and highly open economies that depend on the US as a market and as a security guarantor such as Taiwan and Singapore. China will be a target of trade measures at a time when the painful rebalancing its economy is undergoing makes it more vulnerable to exogenous shocks. North Korea will also become a growing threat to South Korea and the region.

How have risks for Asia changed recently?

  • With the global economy gaining momentum and showing signs of rising trade intensity, Asian exporters can expect a pick-up in external demand. Coupled with expansionary policy support, Asia could see a strong rebound.
  • However, the impact of one-off shocks could prove to be more damaging and reverse the gains Asian economies have been seeing more recently. We assess the prospects.

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23-Nov-2016


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