The presidency of Donald trump for Asia will be as painful as his whipping boy – Mexico, analysts say the Bank.
Nomura. The presidency and trump undoubtedly would have a negative impact on the GDP of Asia will lead to inflation, will cause a reduction in the surplus in the trade balance and trigger the transition to flawed macroeconomic policies. The most vulnerable from the point of view of economy and geopolitics will be South Korea and the Philippines, are the least at risk are India and Thailand.
Trump has no experience in politics, while his economic nationalism and bluster during the election campaign, the conflicting statements and positions on critical issues and is forced to doubt that he really is going to take on the post of the President. Not to mention the fact that he is allowed to do, given the whole American system of checks and balances.
Protectionism, national security threats and uncertainty about U.S. foreign policy remains a key risk.
And one of the main problems was the threat of a trump to terminate the existing trade agreement type North American free trade agreement or to raise tariffs.
Despite the fact that trump has threatened to impose new trade barriers against Mexico, Japan and China, a significant would be the impact of China on other Asian countries that are major suppliers of value-added products.
In addition, while trump has promised to increase the US military presence in Asia, he also claimed that he can force the allies to pay the full cost of security guarantees. If trying to squeeze significant financial contributions from Japan and South Korea will fail, trump may reduce regional military presence of the USA or close the base completely.
Even a partial withdrawal of the Armed forces of the United States will likely inspire Beijing to maintain the current pressure in the South China sea.
In addition, the withdrawal of U.S. troops from South Korea has dramatically changed the balance of forces on the Korean Peninsula, given North Korea’s quest to increase the radius of destruction of missiles – carriers of nuclear warheads.
The withdrawal of American troops from Japan may encourage Prime Minister Shinzo Abe’s efforts to change the Constitution and strengthen its military capacity, which in turn can increase the potential for open conflict in the region.
Nomura analysts also expressed fears that President trump will begin to implement their plans to reduce pressure on the corporate sector, which will lead to a sharp rise in the budget deficit over the next 10 years, to the detriment of fiscal sustainability of the United States.
The Bank is also concerned about trump’s statements that he intends to “restructure” the debt, which is likely to make Asian Central banks cut investments in us Treasury bonds, thereby causing sharp fluctuations in exchange rates and bond prices.
“It is unclear how financial markets should prepare for the “known unknown”. The Chinese currency will fall further, if a hypothetical President trump will aggressively pursue its policy. The Korean won weakened against the background of less favorable trade relations with the USA and with greater political uncertainty on the Korean Peninsula”, – stated in the report of the Bank.
However, the situation in Indonesian rupiah and Malaysian ringgit could be better due to strong domestic demand, investment flows.
