“A president for all Americans” – this was what newly elected US President Donald John Trump pledged to the US Nation after his victory over Democrat bet Hillary Clinton on his acceptance speech a few hours ago. The world had a mixed reception over the results of the recently concluded 45th US presidential election as Clinton headed the polls right before the start of the voting process. Amid all the negative notions and comments all over the social media, one important question is waiting to be answered – what will happen to the economy of the United States now?
At the start of the session on Wednesday, the apparent plunged of the US stocks and currency as Mr. Trump headed the presidential race, provided a sneak of what could be the future of the US economy in the hands of the Republican leader. The weakness of the greenback against a basket of currencies was extended with euro and sterling enjoying at the offensive ground.
The election jitters made the US dollar weak as the investors remained worried over the potential victory of Mr. Trump. Eventually, the global stocks went even lower at the close of the trade as fears appeared similar to that of Brexit. The US Dollar Index, S&P500 Futures, Nasdaq Futures and DAX plunged remarkably. Similarly, Asian indices declined, including the Nikkei 225, IDX Composite Index, CSE All Share, Nifty 50 and PSEi Composite.
As expected, safe haven assets such as gold celebrated in the middle of market turmoil. Gold futures for December delivery, together with other precious metals such as silver and copper, jumped as the market opened. However, other commodities slumped, headed by the decrease of oil prices and followed by the farm-based-commodities like cotton and coffee.
No More Rate Hike?
It has been concluded that a Clinton’s victory would definitely reinforce the implementation of a December rate hike. The market confidence over the US economy stability was a bit more certain under the hands of the former US State Secretary, experts said. In the contrary, a Trump’s governance weakens the investor’s appetite as he might break the international free trade agreement which may be way harmful for the economic growth that the central bank has been waiting for prior to the rate increase.
During the campaign period, Mr. Trump reiterated that rates must be kept low to hinder the currency appreciation which he thought might cause bigger problems in the future. “What do we do with all of the money that we owe everybody when rates go up and now all of a sudden we have to borrow at two points more? One point more, even, is devastating. It has to be handled very, very carefully,” he pointed out.
Although Fed Chairwoman had made it clear that partisan politics plays no role in their decisions about the appropriate stance of monetary policy, the economic and political balance is another concern in the part of the US central bank. This lack of trust on Trump’s ability to lift the US economy affects spooked the investors and like a domino, it will fall into an unsteady financial market. It is fair to say that Fed would not want this to happen. The US central bank is scheduled to conduct a two-day policy meeting next month, whereas, Brexit and US Election will definitely leave a hidden impact.
"We have a great economic plan, we will double our growth and have the strongest economy anywhere in the world.” The trump’s presidency has pledged to make the US the greatest job-producing country in history during his term. How would he do it? He is vocal in making the economy dynamic as he brings back jobs from China, Japan and Mexico. Mr. Trump wants to eliminate outsourcing and to keep the US minimum wage to let the US companies compete better globally.
His excellency plans to hit Mexican imports with a 35 percent tariff and impose countervailing duties on all imports from China as well. With his rejection of free trade and putting back tariffs to American industry, a trade war may appear along the way. How about the American companies which depends on the international supply chain? Are negotiation possible or should be in full compliance? This is obviously damaging in the growth of the US.
The same with the anticipation of the economists, the international relations of the US in other countries might be at stake as he sends illegal immigrants back. It is politically correct, but it might leave blow by blow feedback from the commoners. In line with this, Mr. Trump aims to out a barrier on the Mexican border and eventually force Mexico to pay for it as he opens the door for legal immigrants.
Further, the new president wants to reduce the debt which he thinks could push 6 percent in the economic growth. In one of his previous interviews, he said “I would use the debt limit. I want to be unpredictable, because, you know, we need unpredictability. Everything is so predictable with our country. But I would be very, very strong on the debt limit. And I could see asking for a very big pound of flesh if I were the Republicans.” Well, that’s quite ambitious considering the “real” stand of the economy right now.
The pressure is on for the investors as the financial market has become greatly volatile over the uncertainties that Trump’s presidency may bring to the world. As the largest economy in the world, any economic and political adjustments or happenings in the United States affect the neighboring and developing countries. Mr. Trump has called for the unity of America, although it may sound like a cliché- it is easier said than done. In my personal opinion, it is just so hard to be optimistic at the moment.