There is still over a month before US president-elect Donald Trump moves back into the White House and supposedly makes good on his campaign pledge to put America first. Yet this has not stopped pundits, economists and investment strategists from fiercely speculating about how Trump will manage the conflicting policy goals of his four-pronged agenda of deregulation, tax cuts, punitive trade tariffs and a crackdown on immigration.
Never mind what is likely to happen in the first 100 days of his second term, even the first couple of days are the subject of intense discussion among analysts. “Trump’s first day of his second term as president may be very long indeed – ‘a day in the biblical sense’ – given the string of campaign promises he pledged to enact,” said Tina Fordham, the founder of Fordham Global Foresight.
Financial markets seem to be taking comfort from the growth-friendly parts of Trumponomics while withholding judgment or downplaying the severity of the damage caused by tariffs and immigration crackdowns. The benchmark S&P 500 equity index hit a fresh high on December 6 and is up more than 5 per cent since Trump’s victory.
In fact, the prevailing narrative is that the resounding triumph of Trump and his Republican Party reinforces the trend of “American exceptionalism”. This is the notion that America’s economy and markets will continue to outperform the rest of the world because of the US dollar’s role as the world’s pre-eminent reserve currency, a large consumer market, vast energy resources and its dominance of the industries of the future.
Moreover, the US benefits from being a relatively closed economy, with merchandise trade as a share of economic output standing at just 19 per cent last year. Morgan Stanley says: “US assets should also do relatively better than [the rest of the world] in an environment of rising trade tension. European and Chinese economies have to contend with a growth drag from a decline in exports and also need to price in higher geopolitical risk premiums.”
Yet there is another narrative that is getting more attention but is more controversial. Trump’s aggressive “America first” agenda may prove to be the catalyst for much-needed policy changes and reforms in the global economy.