Experts are trying to determine what risks Trump's presidency poses for China's economy. It is a burning issue as China contributes a lion’s share to the global economy. Analysts at ANZ also attempted to figure it out. They have encountered many surprising findings!
Concerns about the highly probable election of Donald Trump as US president have agitated Asian markets. China, in particular, is alarmed by this scenario. Against this backdrop, experts are speculating on the risks and assessing the new obstacles that could arise from Trump’s protectionist policy.
In the case of the Republican’s victory, one of his first steps would be to hike tariffs on China’s imports. According to ANZ, this will hardly deal a serious blow to Asian markets. The eccentric billionaire is interested in bolstering US economic growth, so he will not venture into radical actions. Tax cuts and the shift away from stringent regulations are expected to have a benign impact on the American economy, ANZ experts predict.
However, analysts suppose that under Donald Trump, US protectionist policy could spread to other economies. China will have to deal with stricter trade rules. This scenario is bearish for China’s economy as the Chinese government is already struggling with slowing growth rates.
"China's current dependence on manufacturing and exports which drive GDP growth means that any tariffs will be a high price to pay for the country," ANZ points out.
The Republican could also step up trade pressure on Beijing by depriving it of its most-favoured-nation status. "This will further isolate China from the US economy and put a strain on domestic growth," ANZ adds.
The US dollar could strengthen during Trump’s presidency, while Asian currencies could weaken on the back of aggressive protectionist policy and robust economic growth in the US. The yuan and yen would bear the brunt of such actions, particularly from hawkish policies. "A renewed trade war between Washington and Beijing, accompanied by stricter American policies, will lead to a protracted decline in most Asian currencies (by about 10%). The conditions for the Chinese yuan may worsen hypothetically," ANZ explains.
At the same time, experts foresee a moderate rally of the US dollar because Donald Trump has repeatedly called for its weakening. The Republican believes this measure is vital to support American exports.
To sum up, Asian markets are on edge due to the scenario of Donald Trump’s presidency. However, such a scenario, i.e. victory with 100% certainty, is currently unlikely. Nevertheless, analysts and market participants have to evaluate all relevant risks.
