2016 will go down as a strange year – First Brexit, then the announcement that Business Tycoon Donald Trump would take over from Obama at the White House. Whichever way you look at it, it seems rather crazy to say the least.

The official Inauguration of Donald Trump as the 45th President of the United States will be held this Friday. In the build up to this, a lot has been said and promised by the man himself, but how will the introduction of Mr Trump effect the global economy?

This is the question on many people’s lips and it’s something here at Moorland Mayfair we are keeping a close eye on. We understand the importance of diversification therefore our funds are invested on a global scale. With that in mind we understand the importance to keep on top of market trends and to switch funds as and when required to maximise performance.

So, let’s look at some of the implications the Trump Election could bring on a global scale. Where better to start than south of the border from the US – Mexico. It was in the early 1990’s when Bill Clinton signed the North American Free Trade Agreement (NAFTA) meaning US manufacturing jobs migrated across the border in to Mexico. This for years has helped massively in boosting the Mexican economy, However, Trump has indicated he is willing to pull the plug with this trade deal if he is unable to renegotiate the agreement.      Furthermore, he has threatened to implement a 35% tariff on certain Mexican goods and send home illegal immigrants living and working in America, 5 million are thought to be Mexican. If implemented in full, the impact on the Mexican economy would be significant. Trade between the US and Mexico would slow, resulting in investment flows to follow suit, with many factories closing.

Moving East, Trump has been precise and clear with his plans when it comes to the country who boasts the second largest economy Worldwide, China. Trump has accused China of manipulating currency which he plans to raise to the World Trade Organisation. Also, the relationship between these powerhouses is set to hit further turbulence after Trump announced he could impose a 45% tariff on imports from China to help American companies compete. The US is quite simply China’s biggest export, therefore if Trump did impose this policy we could see a slowdown in the growth of China’s economy and a loss of many manufacturing jobs.

The outlook for the rest of Asia seems similar as Trump plans on reducing Asian exports to boost companies based in the US. This will no doubt slow the economic growth for the likes of Japan, Singapore & South Korea. However, if the US do implement this policy, it represents an opportunity for China to increase its influence in the region and in turn, make these nations less reliant on the American market.

There were fears of a severe market crash in Europe following Trump’s victory, however the European markets reacted in a positive manor which calmed the leading banks. Although the financial implications are currently unclear, there are concerns around exports much like In the East which are of course a large source for growth.

As for Britain, Mr Trump has come out and said the UK will be at the front of the queue for a new trade deal, which can only be regarded as good news for the UK. However, if Trump does implement the policies outlined so far, the British economy will not be immune to global economic movements, whether negative or positive.

So, from the face of it, it is clear Mr Trump’s main priority is to boost the economy of his home nation, and in his words, ‘Make America Great Again’. When all is said and done, Mr Trump is a business man, and a successful one at that. However leading the largest economy in the World, having a monumental influence on the Global markets and economy is a whole new ball game. Watch this space.

 

Raffaele Castaldo of Moorland Mayfair Wealth Management

Raffaele Castaldo DipFA

 

17 January 2017