This blog was written by James Gurling, from our sister agency MHP. Check out MHP’s blog here.
“It is time for us to come together as one united people … I pledge to every citizen in the land that I will be President to all Americans” So said Donald J Trump, as he accepted his election as the 45th President of the USA.
After a rumbustious and often flagrantly misleading campaign, these are not words recognisably out of the playbook we have come to associate with Trump.
Ever the pragmatist, Trump said what needed to be said to help rally the markets as they dived in reaction to his election – the Dow Jones dipped 4%, LSE 2%, Hang seng 2.7% and the Nikkei 5.1% . As observers from afar, we can only hope that he means these words more than he meant others …
Throughout his campaign Trump has littered his speeches with personal attacks, incredible promises and fact-free assertions of opinion. We are a long way from defining ‘Trumpism’, but there are enough nudges and winks to know that if he comes 50% good on his promises, we in the UK may be in for a bumpy ride in the years ahead.
Theresa May has been quick to invoke memories of the once ‘special relationship’ that the UK enjoyed with the USA, but it is not clear at all that Trump as any particular regard for the UK other than as an exemplar of populist isolationist campaigns.
So how is a Trump presidency likely to impact the UK?
The simple fact is that, as the largest economy in the world, the USA will set the pace for economic development whether it means to or not. Trump inherits an economy that has been expanding since 2009. His domestic, international and diplomatic policy activities could have a profound impact on his own economy, and what happens in the USA simply heightens the importance for the UK.
What we know:
Trump has in mind large scale changes to domestic American policies. His intention is to cut both personal and corporate taxes significantly. One of his campaign managers openly suggested that European countries such as the UK and Ireland were already competing on low tax rates and sucking money out of the US economy. He aims to keep American money in the American economy and thereby reinvigorate the domestic economy. That talk could presage a transatlantic tax rate war.
In an unhealthy echo of the Brexit debate, Trump also believes that ending ‘birthright citizenship’ and deporting illegal immigrants will free up the domestic economy and reduce the need for ‘Obamacare’ – which he intends to scrap. The speed with which he seeks to achieve this will impact hugely on the labour supply, and it remains to be seen how his supporters in the ‘rust-belt’ states will react when they discover these vacated low skill jobs are their reward.
There might at least be construction work going in the south, as the fabled wall is built along the border with Mexico.
While his domestic facing companies can expect to benefit short term from his trade policies, the knock-on impact on the global economy will be significant. As the Trump White House seeks to rewrite trade agreements and impose higher tariffs on Mexico and China, the new protectionist stance will worry his multinationals and have significant knock-on impacts on the UK and Europe. While Trump has indicated a preference to deal with the UK ahead of the EU, it is difficult to believe in practice that a market half the value of the EU free trade area will take precedence.
Just as the UK is cutting itself off from the EU market, Theresa May must now face the very real prospect of being cut off from the USA – marooned in splendid east Atlantic isolation. And it is difficult to imagine that the EU, with the prospect of the USA pulling up the international drawbridge, will continue to rate as highly as it currently does the prospects of arriving at a settled trade deal with the UK.
With Trump’s economic protectionism comes diplomatic isolationism. As with much on his domestic agenda, Trump seems to view foreign engagements as a luxury his country does not need to afford. The security of Syria, Afghanistan, Iraq, Palestine, Israel or for that matter the integrity of the European block mean less to a leader not immersed in the wider picture of global security and whose political experience is deal-based rather than consensus-focussed.
How much easier Trump must wonder is it to come to a grand accommodation with Russia than to invest billions in the likes NATO – particularly when other NATO members routinely fail to meet their military spending commitments? Such false economies may send entirely erroneous indications to Putin, already buoyed by the ease with which the Crimea was annexed and other portions of Ukraine assimilated into Russia. Balkan states will today be understandably worried – and the diplomatic role of the European Union commensurately heightened as its borders are effectively threatened.
If there is an interest in internationalism, it is to counteract the advancements of China as an economic and political force on the global stage. Time and again Trump’s campaign speeches targeted China. Overlooking the huge amounts of US debt that China holds, Trump believes that China has used its WTO membership to steal American jobs. He says he would impose steep tariffs on Chinese goods, respond to domestic subsidies that China invests in its own exports and hold the country accountable for the hacking and IP theft he says it sponsors. But his stand-off with China is not purely economic. In a distinctly un-isolationist move, he would increase the USA military presence in the South China sea as a deterrent to China’s territorial expansion through the establishment of artificial islands.
During this most acrimonious of campaigns Donald J Trump has said many things. As the rest of the world comes to terms with the result, attention now turns to how many of his threats and promises were mere bombast. Like the £350m the Brexiteers promised the NHS, Trump has won with the aid of big talk – just how much will he deliver?
*although this is categorised as ‘Stuff we like’, it is very much only the blog post we like, not the situation!