Prepare for Trump's worst

Prepare for Trump's worst

In only a matter of hours, tycoon-turned-politician Donald Trump will be inaugurated as the 45th president of the United States of America. It is quite safe to say that the world will be watching the moment with anxiety. More anxious will be Asian countries which have economies that depend greatly on the vast US market.

The game changing election of Mr Trump, whose campaign slogan to "make America great again" managed to galvanise the nation to put him in the highest office, has made him one of the most powerful men on the planet.

Mr Trump's isolationism and protectionism -- he vows to move jobs back to the US and to impose tariffs on goods produced outside US territory -- have created a lot of concern for the global economy that has become accustomed to a globalised economy.

Goods that are manufactured in one country such as Thailand are reprocessed elsewhere such as in China or Taiwan and then shipped to the US where consumption remains strong.

All this could change when Mr Trump starts to implement many of his election campaign pledges. And even though Mr Trump has singled out China, as well as Mexico, his harsh policy on China could affect countries in this part of the world which have benefited from the globalisation trend.

Some have suggested that countries such as Thailand will be able to withstand any major policy upheaval in the United States. In particular, Thai authorities believe Thailand may stand to benefit amid the rise of US protectionism as it could tilt the tide of investments to Thailand because the country could used as a production base to avoid heavier taxes on goods manufactured in China. This cannot be guaranteed or treated as a long-term solution.

Thailand itself relies on the US and China as two of its biggest export markets. The country exports roughly the same to these two nations which account for 11.25% and 11% respectively. This does not take into account the 5.5% of total exports of Thailand going to Hong Kong, another re-export market.

Analysts estimate about 20% of the US$23 billion of Thai goods exported to China each year are re-exported to the US.

Although Thailand's situation is not as bad as that of Taiwan, Japan, and South Korea when it comes to re-exports to the US from China, it is still a significant amount.

China which has already been dealing with its slowing economy with growth now falling to below 7% by some estimates from double digits a few years ago could be at risk as its banking system and its state-owned enterprises continue to be riddled with problems.

It is therefore important for Thailand to continue to keep its exports humming, even at a slower pace than in the past, because exports still account for nearly 70% of the country's gross domestic product (GDP).

It's still a question if the Trump administration will live up to its 45% tariff imposition plans on goods from China, as many believe this is more of a trade negotiations tactic, but even a slight tariff on goods imported into the US from emerging countries could start a domino effect of economic problems in the region.

Our policy makers deserve some credit for strengthening the financial system, but they need to realise and prepare themselves and the country, not to be too complacent.

With Mr Trump (who is seen as unpredictable) in office, we should be prepared for the worst-case scenario.

Editorial

Bangkok Post editorial column

These editorials represent Bangkok Post thoughts about current issues and situations.

Email : anchaleek@bangkokpost.co.th

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