Once Donald Trump is installed in the White House from next January, what future US domestic policy can we expect?
According to Arun Pillai-Essex, Americas analyst for business management consultancy Verisk Maplecroft, with Republican control over the executive and legislative branches, key policy concerns will be prioritised. The main legislative concerns for the Trump administration will range from tax and entitlement reform to the deregulation of heavy and extractives industries.
However, Trump’s rejection of party orthodoxy and his fraught relationship with key Republican leaders, including House Speaker Paul Ryan, suggests that there will be a degree of ideological malleability.
The need to make concessions in exchange for party support will result in the moderation of some of the president-elect’s more radical policy proposals. To address the demands of his core support base suggests that infrastructure spending will increase significantly. An industrial strategy to support moribund industries, particularly coal, will also be on the cards.
A rise in commercial protectionism will result in an unpredictable business environment for US-based companies, threatening the integrity of current supply chains and deterring investors looking to expand operations in the US.
Africa received barely a mention by Trump during the campaign, says Ben Payton, Verisk Maplecroft’s head of Africa research. The president-elect’s engagement with the continent to date has been limited to a handful of posts on Twitter.
It is likely that Trump will be restrained to some extent by career officials in the State Department from implementing radical changes to US Africa policy. Even if he is genuinely determined to cut aid and rewrite trade relations, other more pressing priorities are likely to intervene.
Nevertheless, cuts to the US$7.1bn package that the US plans to deliver to Africa next year would chime with Trump’s populist rhetoric. He has claimed that “every penny” donated to Africa is “stolen” and in 2014 criticised Obama for helping fight Ebola.
However, Trump has since acknowledged that aid can stabilise vulnerable countries, and has promised to “lead the way” in Aids relief. So there are grounds for hope that he would not make extreme cuts – even if aid spending is almost certain to fall.
Regarding trade agreements, African leaders will be concerned by Trump’s pledge to scrap trade deals that hurt US manufacturers. The president decides which countries receive duty-free and quota-free access to the US market under the African Growth and Opportunity Act (AGOA). Since most African exports to the US are either natural resources or low-value goods, lobby groups rarely argue that AGOA has hit American jobs. When such pressure does arise, Trump would be likely to take an aggressive stance on the legislation.
Trump’s anti-free trade stance is likely to negatively impact on US trade and investment in Asia, reports Guo Yu, Verisk Maplecroft’s head of Asia research. His aim of bringing US businesses back to the homeland and punishing companies outsourcing manufacturing abroad, will be bad news for factories in Asia.
From a geopolitical perspective, Trump won’t be able to fundamentally alter US treaty commitments with its allies in the region without congressional support. As the Republicans are set to retain control of Capitol Hill, the party is unlikely to entertain any attempt that may undermine established security commitment between the US and Japan/South Korea.
China will benefit from Trump’s isolationist foreign policy, giving the country a chance to insert more influence over the region and beyond. Ultimately, Beijing would be happy to see a drawback of US military activities in the South China Sea.
The biggest source of tension between Beijing and Washington under Trump will be bilateral trade. The imposition of punitive trade tariffs would hurt Chinese exporters, particularly in the electronics sector, and will likely result in tit-for-tat trade barriers being imposed by Beijing.
Trump has consistently argued that Japan should shoulder more of the costs for its national security. Should the US scale back its military presence in Japan, Tokyo would need to increase defence spending to compensate, which would expand its chronic budget deficit even further. Most significantly, Trump’s victory signals the death knell of the Trans-Pacific Partnership (TPP); not something Japan wants to see as the TPP was projected to boost Japan’s gross domestic product (GDP) by 2.7% by 2030.
If US-Philippines ties weren’t in jeopardy before, they are now. Trump is likely to approach the military alliance with the Philippines in a similar way to president Rodrigo Duterte; with scepticism. Any sign that the US is now a less than reliable partner on trade will make Manila even more regionally-focused and turn it towards Beijing and Tokyo to fill the gap. Likewise, Malaysia and Indonesia will continue to look to China and other regional peers for investment and partnership.
Prospects for concluding the Transatlantic Trade and Investment Partnership (TTIP) between the US and EU were extremely poor even before the election, says Florian Otto, the firm’s head of European research. Trump’s anti-trade platform means the deal now stands virtually no chance of being agreed. However, beyond that expect a change in current trade arrangements between the US and EU is unlikely. Given the incoming president’s opposition to trade deals, the EU Commission (EC) is unlikely to pursue closer trade arrangements with the US.
In the UK, Brexiters will take heart from the victory of another anti-establishment figure, although available evidence shows that Trump has consistently opposed free trade. His political sympathies for Brexit are therefore unlikely to lead him to prioritise a trade agreement with the UK once the country leaves the European Union (EU).
Based on Trump’s positive statements about Russia while on the campaign trail, a softening is anticipated in Washington’s stance towards Moscow. Trump is unlikely to support maintaining trade sanctions and embargoes currently in place. The sanctions regime cannot be effective without US participation, and it is highly unlikely the EU will maintain trade restrictions independent of the US. While the Republican Congress may try to tie Trump’s hands on this issue, it is unclear if they have the legal mechanisms to do so.
Trump’s success will embolden populist anti-establishment parties across Europe, particularly the French Front National, which also seeks to upend French politics when the country elects a new president in April-May 2017. While the shock victory will strengthen the FN’s confidence, it also holds the potential to mobilise the support of centrist parties should Trump’s presidency get off to a chaotic start.
Trump’s victory will trigger a period of severe economic uncertainty for Mexico, as was highlighted by the collapse of the peso as markets reacted to the election result, says Jimena Blanco, head of Americas research.
Mexico has the most to lose if Trump acts on his promise to pull out of the North America Free Trade Agreement (NAFTA) agreement, as such a move would kill its export based economy. However, putting an end to NAFTA would be unpalatable for US exporters and intense lobbying by US companies may moderate his stance on the issue.
Banco de México is likely to hike interest rates to curb capital outflows and defend the currency against a severe depreciation, but tighter monetary policy will only exacerbate the prospect of a recession.
If he implements his campaign promise, Trump will use the Republican majority in both houses of Congress to undo the liberalisation of Cuba relations spearheaded by Obama. However, the majority of Americans are in favour of ending the embargo. In the best case scenario, Trump will make a concession to non-Cuban-American public opinion and maintain the current status quo.
The new president’s protectionism will result in a cut-throat currency war, with the devaluation of the Argentine peso (ARS) and Brazilian real (BRL) working against the ongoing efforts of those governments to curb inflation. The revision of trade relations and bilateral agreements with commercial partners could affect Brazilian exporters, for whom the US is the second largest destination market. Indeed, Trump has mentioned Brazil as one of the countries he believes has benefitted from commercial arrangements he deems unjust.
Middle East and North Africa (MENA)
The prospect of president Trump will undoubtedly be met with alarm in both Saudi Arabia and Iran, which remain locked in a regional proxy struggle, says Torbjorn Soltvedt, head of MENA research.
For the wider Middle East, the most immediate impact will be growing US disengagement from the region and a further weakening of ties between the US and its traditional regional allies. For a region faced with multiple crises, a sharp acceleration in this disengagement is likely to prove highly destabilising.
The Arab Gulf states have already expressed grave concerns over this trend, especially during Obama’s second term. While the end of the Obama presidency has been a welcome prospect in most Gulf capitals, the reality of a Trump rather than Clinton presidency will only reinforce existing fears. This is despite Trump’s strong criticism of the nuclear agreement between Iran and world powers and the very real threat to the deal’s integrity from January 2017 onward.
More broadly, Trump’s proposed temporary ban on Muslims entering the US will put relations between the US and most of the MENA region on the worst possible footing. Trump’s position on the Israeli-Palestinian conflict will be a wildcard, with the next US president declaring himself ‘neutral’ on the issue. Ultimately, however, foreign policy – particularly in the Middle East – is very unlikely to be among Trump’s key priorities.
One possible exception will be the fight against Islamic State. Much will depend on the success of ongoing operations against the group during the rest of 2017, but closer coordination between the US and Russia is a likely outcome next year. While this could place the group under greater pressure, an aggressive US-Russian operation also risks polarising the conflict in Syria and Iraq further.
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