How will the end of Barack Obama’s presidency and Donald Trump’s appointment affect the global financial markets?
The 44th president of the United States of America, Barack Obama, has given his farewell address. His 8-year tenure as President is over and by the time this article is published, the 45th president-elect, Donald Trump, would more than likely have been inaugurated on 20 January 2017.
By and large, Trump’s public utterances have been explosive, changeable, rude, bombastic, and offensive, leaving the global community wondering what America is getting herself into. In my limited understanding (I am not a political expert, nor am I a historian), the election of Donald Trump is in line with the current global sentiment. There seems to be worldwide growth in nationalism and socialism. Look at Brexit, and popular nationalist sentiment in France, Germany, and the Netherlands, amongst other countries.
Obama spoke extensively on the need for America to continue along the path of democracy and not to allow nationalism to destroy everything that the USA has fought hard for.
“Democracy does not require uniformity… democracy does require a basic sense of solidarity — the idea that for all our outward differences, we are all in this together; that we rise or fall as one. There have been moments throughout our history that threatened to rupture that solidarity…. And how we meet these challenges to our democracy will determine our ability to educate our kids, and create good jobs, and protect our homeland. In other words, it will determine our future… Our democracy won’t work without a sense that everyone has economic opportunity.”
He has also urged Americans not to lose faith in the future. According to Jeff Mason of the Mail & Guardian newspaper, “President Barack Obama urged Americans on Tuesday to stand up for US values and reject discrimination as the United States transitions to the presidency of Republican Donald Trump.”
Free Reports:
Many feel that Trump has moderated his explosive comments and that he is indeed the right man for the job. Others remain staunchly against what he stands for. The fact of the matter is that the next four years are cast in stone. No one can change the fact that the American people elected Donald Trump as the 45th USA president. What impact will this have on the American economy and, by extension, the global financial markets?
Donald Trump’s policies and the global financial markets
According to the Stern Options blog, “Trump will remain a wildcard on the global scene.. [however]… All signs point to a strong dollar through the rest of the year.”
Trump seems to be building a partnership with Russia’s Vladimir Putin instead of the traditional European Union countries, and he is intent on starting a trade war with China. He has spoken out vociferously against China, the importation of Chinese goods into the USA, and he has proposed a 45% tariff increase on all Chinese goods. In a nutshell, he blames China for stealing American jobs and capital.
Unfortunately, the addition of a 45% surcharge to all Chinese goods imported into the USA will cause economic hardships for the blue-collar workers that make up Trump’s support base. Prices of clothing and basic necessities will rise, knocking more people below the breadline. Trump’s theory is that it will protect USA jobs and promote USA business. In reality, this surcharge will have a negative impact on the USA and, by extension, the global economy. In the past, Chinese and American trade has generated major benefits for the American citizen. The manufacturing of goods in China has kept the prices lower than they would be if the same goods were manufactured in the USA. It is true that the number of jobs has decreased in the USA since the manufacturing industry has been subcontracted out to Chinese companies; however, adding a 45% tariff onto the price of all Chinese imports will do more harm than good. It won’t add any jobs to the USA economy. It will only increase the cost of goods.
At the moment, the global financial markets seem to be pricing in Trump’s ascendance to the USA presidency. The US dollar remains strong based on the promise of increased jobs in the construction sector. Trump has promised to renew ageing infrastructure.
Final words
Because the Trump factor is a wildcard on the global geopolitical stage, no one can really safely predict how long the strength of the US dollar will last. Currently, as said before, analysts are predicting a strong dollar throughout 2017, but, when all is said and done, anything can happen. The only thing we can do is wait, watch and see!
By Taylor Wilman