The Trump factor

The recent election outcome could see several ways in which life could change under a President Trump. Here are a few offerings for consideration based on recent statements after last week’s election as well as policy statements he made before his win.

Mr Trump has opposed and has been verbally very critical of the proposed Trans-Pacific Partnership deal, and demanded fundamental changes to the NAFTA (The North American Free Trade Agreement) pact with Mexico and Canada.

He has also threatened to impose a punitive 45 per cent tariff on goods from China, causing alarm that the probability of a trade war is quite high. There is a high risk of recession if a trade war results, depressing stock prices and treasury yields for a sustained period. This should be of concern to us in the Caribbean since we have built our small open economies on globalization and free trade over the last two decades. Moving to a new trade regime that must be spelt out would take time. This can also affect our investments which may earn low returns for a longer period.

While President Barack Obama began his term by spelling out his vision of a world without nuclear weapons, Trump has said that Obama’s deal with Iran, which seeks to prevent the Islamic republic from attaining nuclear weapons, would be dismantled or at least restructured.

Trump has also stated that he has no problem if both Japan and South Korea developed nuclear arsenals. He has raised concerns about the US’s treaty commitments to NATO allies that do not provide finance to assist with the cost to running the prganisation, while suggesting a much closer relationship with Russian President Vladimir Putin.

Admittedly some of these ideas are not new, but the creation of global uncertainty that removes a dominant power from the global scene means countries will have to militarize to protect themselves.

This will not only be costly for us but also makes us vulnerable to larger hostile countries. The creation of a CARICOM force with a military plan and security net would have to be considered and will require financing to acquire the necessary hardware.

Trump has also made it very clear that Obamacare (the Patient Protection and Affordable Care Act which was intended to reform the health care industry and give more Americans access to affordable, quality health insurance and to reduce the growth in US health care spending) will be “released and replaced” although recently he stated that he will keep a few key elements.

In addition, he has indicated that a comprehensive alternative will be developed to encourage competition between markets in different states. If health-care costs increase in the US, this will affect us in the Caribbean as many of our medical tests as well as procedures, including surgeries, are carried out in the US. It will also see pharmaceuticals increase in cost.

Trump has promised the biggest tax changes since those introduced by Ronald Reagan, pledging to cut taxes across the board. He says no American business would pay more than 15 per cent of their profits in tax, compared with a current maximum of 35 per cent.

The top rate of tax would fall from 39.6 per cent as the number of tax brackets are reduced. Any alarming increase in fiscal deficits that attempts to increase national debt and lead to increased imports worsening the trade deficit can weaken the US dollar, making commodities more expensive and affecting our inflation.

US securities, if made unstable, can introduce risk to several portfolios locally and regionally.

These fiscal initiatives can make the US a far more rewarding destination for foreign direct investment (FDI) which can take investor interest and FDI away from Trinidad and Tobago and the Caribbean.

Trump has all but stated that global warming is a hoax invented by China to make US manufacturers uncompetitive, and he has vowed to “cancel” the Paris climate agreement, which built on a deal Obama struck with China.

He also stated he intends to stop all US payments for UN global warming programmes. However, climate change is affecting us in the Caribbean.

The more extreme weather (hurricanes) and rising sea levels introduce vulnerabilities that require investment in building resilience. Dismissing global warming is not in our interest and can harm those programmes that benefit countries in the Caribbean that must strengthen infrastructure, build sea walls and reinforce buildings to withstand more extreme weather and higher sea levels.

One other issue that certainly will affect the Caribbean is the possible change in immigration policy in the US. The current President has supported comprehensive reform that would aim at providing each immigrant with an opportunity to get full citizenship.

Trump has argued of the need to build a wall on the Mexican Border, call for a ban on Muslim immigration and the deportation of eleven million unauthorized immigrants. It must be noted that has been recently revised to 3 million.

He has also suggested extreme vetting of immigrants as a possible policy option going forward. What this will mean for the Caribbean will depend on the specifics of any policy changes.

Certainly, an influx of Caribbean nationals (a number we do not know) would put pressure on the job market, social services, health services, security apparatus, requirements for low income housing, and has other socioeconomic implications. We in the Caribbean must look at what is happening to foresee and prepare for the possible impact.