IMPACT OF TRUMP ON

WORLD ECONOMY
Presented By:
Srinath Narayanan 007/2016 Nikunj Batra 010/2016
Surbhi Chaudhary 008/2016 Anadi Tripathi 011/2016
Sidharth Gupta 009/2016 Dhruv Joshi 012/2016
  About Trump
 How he became President
 Impact of Trump on China
Flow Of  Impact of Trump on Europe

Presentation  Impact of Trump on Japan

 Impact of Trump on India
 Impart of Trump on Soviet Union
 Impact of Trump on United States
  Born on June 14, 1946

 A successful American businessman,

television personality, politician, and
the President – elect of the United
States.

 Born and raised in Queens, New York

About Trump City

 Received his economics degree from

the Wharton School of the University
of Pennsylvania in 1968.

 Built, renovated, and managed

numerous office towers, hotels,
casinos, and golf courses.
  Forbes listed him as the
324th wealthiest person in the world
(113th in the United States), with a
net worth of $4.5 billion.

 He considered running as
a Republican for the 2012 election,
but ultimately decided against it.
About Trump
 In June 2015, he announced his
candidacy for the 2016 election, and
quickly emerged as the front-runner
among 17 contenders in
the Republican primaries.
  Trump copied and recast Ronald Reagan’s promise to ”make America great
again.”

 In four words it captured both pessimism and optimism, both fear and hope.

 It went straight to the gut, unlike rival Hillary Clinton’s website manifesto and
more nuanced proposals.
How he
became  It was an appeal to the heart, not the head.

President  The people believe in their country. And there is a deep sense that the
country is being taken away and betrayed.

 And that is so deep with people that they’re looking at a guy who’s flawed as
hell like Trump and at least it’s a way of saying they are really angry about the
way the elite has treated their country.

 Consequently it overwhelms all the bad stuff from Trump.

  In 2003 Trump became the host of the reality TV show The Apprentice, in
which hopefuls competed for a chance to work for his organization.

 For a decade millions of viewers were fed the idea of Trump as a successful
businessman, a boss with the power to say: “You’re fired!”

How he
 It gave him 10 years of being in front of the American public being the boss,
being CEO, hiring people, famously firing people, being the guy who can fix
it, the one who knows everything, being the big authoritarian patriarchal
guy.
became
President  Trump seemingly declared war on his own party. During and after a
traumatic primary campaign, he attacked the Bush family, House speaker
Paul Ryan, former nominees Mitt Romney and John McCain and many more.

 But many Trump voters relished his attacks on the party establishment. They
complained the the members of Congress they elected made promises they
fail to keep. They noticed the years of deadlock and government shutdown
and thirsted for change.
  Trump said that he will put higher import duties on various Chinese
products.

 It will promote the domestic market in the US.

 His protectionist approach could restrict financial and trade flows

between the US and China.
Impact on
 Trump’s win might lead to a further devaluation of the yuan. A yuan
China devaluation would increase China’s export competitiveness.

 Currently, China’s financial system is showing some pressure. The debts

of some businesses haven’t been fully recovered.

 The People’s Bank of China is selling government bonds and putting

pressure on bond prices. So, the bond yield is also rising. It’s ultimately
putting pressure on the currency.
  The optimistic view of the US economy is bringing investments into
riskier assets such as equities and the dollar index. The investments
in riskier US assets are making Asian currencies weaker.

 If China devalues its currency enough, it will increase export

competitiveness. That will bring some investments into the country,
and bond prices will rally.

Impact on  Also If Trump carries out his campaign pledge, China’s exports to the
U.S., worth $483 billion in 2015, could collapse. Needless to say,
China American exports to China, estimated at $116 billion as of 2015, will
plunge as China retaliates.

 The economic consequences of such a trade war will not be

restricted only to the U.S. and the Chinese economy. Since 35% of
China’s exports in 2015 was “processing trade” (China imports
components from other countries and then assembles them for
exports), $169 billion of Chinese exports to the U.S. in 2015 actually
represented imports from Japan, South Korea, Taiwan, and others.
Obviously, these economies, all critical trading partners of the U.S.,
will be collateral damage.
 • EU-US trade deal TTIP, which currently is under negotiation, is already
struggling with many hurdles in Europe. Now it faces a possible US veto, given
Donald Trump’s skepticism towards trade deals.
• The Eurozone should be well aware that its fate is strongly linked to how
Trump intervenes in monetary policy, because he’s said he won’t shy away from
doing so.

• Trump has been saying he’d print money to finance government spending,
calling himself “the king of debt”. But there’s some confusion.

Impact on • He is likely to hike the interest rate in the near future. This matters in a crucial
way for the Eurozone, where the ECB also only has a limited impact on interest
Europe rates, which are subject to the global environment that is partly controlled by
the Fed.

• If the current trend of increasing interest rates continues, cash-strained

Eurozone governments may face a problem, ultimately having to appeal to
Eurozone “solidary” again.

• This will lead to poisoning relations between European countries and

propelling Trump– style anti-establishment parties to power.
 Eurozone
Mixed picture:

• ECB policy has suppressed euro, suppressed borrowing costs,

and boosted asset prices

• Consumer spending weakening after good growth

Impact on
• Unemployment remains high
Europe • Investment remains weak

• Strength in Spain, Ireland, Germany

• Weakness in France, Italy

• Inflation starts to accelerate

 Persistent stagnation and deflation:

• Per capita GDP growth not bad

• Despite Bank of Japan easing, including negative interest rates,

deflation persists, credit creation falters

Impact on • Economy intermittently stalls

• Exports weaken as yen strengthens

Japan
• US dollar strength could reverse upward pressure on yen

• Prime Minister wants fiscal stimulus

• Failure of TPP hurts

  What India stands to lose:

Trump's 'hawkish' trade policy of 'America first' and his plans to

renegotiate all foreign trade deals will affect trade treaties with India, too.

Trump terms H1B visa program as 'unfair', and his stated purpose is to end
Impact on the program. If Trump wins, Indian IT stocks and IT companies like TCS
and Infosys are likely to be the first victims of this policy.
India He is often seen exhibiting a double standard towards India — on the one
hand he has said India is doing great and on the other he said he would
bring American jobs back from India.

Trump's promise to reduce the US corporate tax rate from 35 per cent to
15 per cent could result in companies like Ford, GM and Microsoft rushing
back to the US.
 What India may gain:

Although Trump wants to put stricter immigration rules, he also says he

wants to woo Indian entrepreneurs and students to the US.

Trump criticized China throughout his campaign, described it as one of

the US's top adversaries. That could make for an advantage to India.

He said he would label China a currency manipulator and impose heavy

Impact on tariffs if China didn't agree to rewrite trade agreements.

India He labelled Pakistan as semi-stable and a safe haven for terrorists.

This could mean the continuation of US' Pivot to Asia policy where India
is seen as a counterbalance to China.

Trump's hard stance on terrorism could also result into deeper Indo-US
defense and strategic ties.

And finally, closer defense ties might give a further push to Indo-US
business ties as well.
  Donald Trump has said that he wants to improve U.S.-Russian
relations and in particular that he wants a closer relationship with
Vladimir Putin.

 One reason it might is Trump’s apparent interest in reducing

traditional American commitments abroad, particularly to the United
States’ NATO allies. Trump has often questioned the continuing value
of NATO and characterized some allies as free riders who do not
necessarily deserve to be defended.

Impact on  Putin’s foreign policy is animated by a desire to restore Russian

power and influence. If the United States were to step back from the
Soviet Union European arena, Putin would be happy to step in.

 However, such a development, which might seem to improve U.S.-

Russian relations, would be heavily criticized in the U.S., not to
mention in Europe, as a surrender to Russian ambitions and a selling
out of American national interests.

 U.S.-Russian relations are founded on a complex history, with

structural differences among national elites that will prove difficult to
bridge through personal rapport among the national leaders.
  He is likely to restore the full range of government contacts, including
between the two countries’ military establishments.

 Second, he will pursue more extensive cooperation with Russia in

Syria, against ISIS but also against other anti-Assad groups that could
conceivably be described as Islamist.

 Most likely there will be a complete abandonment of the existing

Impact on policy formulation that there is a moderate Syrian opposition and
viable alternatives to Assad, which will closely bridge the U.S. position
with that of Moscow’s.
Soviet Union
 And finally, the active sanctions policy against Russia is likely to end,
though existing sanctions will not be lifted without a quid pro quo.

 One possibility is Russia making itself attractive as a potential partner

in dealing with China. The inertia of distrust and confrontation may
make a grand bargain elusive, and pursuing such lofty goals too quickly
could actually jeopardize Trump’s long-term vision for a relationship
with Russia, but in the short term he can make notable changes to the
current bilateral relationship.
 What to expect from the Trump Administration m the
Trump Administration

Traditional Republicans Trump Republicans

Tax cuts and reform Restrict trade

United States Deregulation Restrict immigration

Free trade and capital movements Industrial policy (Carrier, Ford, GM,
Boeing, Lockheed)

Encourage skilled immigrants Infrastructure investment

 What to expect from the Trump Administration m the
Trump Administration
Topic Policy
Trade • Wants to label China a currency manipulator, possibly impose
tariffs
• Will withdraw TPP, negative impact on Japan, empowers China
• Wants to re-negotiate NAFTA, possibly impose tariffs on
Mexico
• Pressure companies not to shift resources to other countries

United States
Spending and deficits • Boost spending on infrastructure, military
• Will not cut entitlements
• Pay for increased spending by borrowing

Regulation • Less regulation of environment, energy, labor, financial

services
• Impose parental leave requirement
• Exit Paris accord on climate
 What to expect from the Trump Administration m the
Trump Administration
Economic and financial impact:
• Tax cuts and infrastructure spending boost supply of bonds, stimulate
economy
• Accelerates wage increases and boosts inflation

United States • Boosts short term economic growth, but not necessarily longer term
growth
• Cutting corporate taxes brings cash home from overseas, boost value of
dollar
• Infrastructure spending and deregulation could boost longer term
growth
• Trade and immigration restrictions slow growth, boost inflation, increase
risk of recession
• Initial market reaction indicates that investors are not focused on trade,
more focused on fiscal and regulatory measures. This could change.
 Asset markets: Ceiling on oil prices
Oil prices rebounded due to:
• Declining U.S. investment and production
• OPEC decision to cut production, not likely well enforced
• If production falls:
United States − Prices will rise.
− Shale producers will return to the market
− Boost production
− Suppress prices.
− A ceiling will be reached.
• Expect a prolonged period of relatively low oil prices
 United States
Economic conditions
Job market strong, mature:
• Job growth slowing, but remains strong
• Job openings rate historically high
United States • United States
Shortages reported, especially for those with
specific skills
• Economy at full employment
• Participation stabilizing after long decline
 United States
Economic conditions
Declining male participation:
• Shifting demand for skills
• Displacement from technology and trade
United States • Hurts economic growth, but also hurts social stability
• Contributes to income inequality
• Contributes to populist politics
 United States
Economic conditions
Influences on the consumer:
• Rising employment
• Wages begin to accelerate – especially at the lower end of the
United States spectrum
• Stronger cash flow, less debt, greater ability to borrow again
• Persistent low energy prices
• Improved financial market conditions
• Rising income inequality slows consumer spending growth
 Recovering from a bad episode:
• Many EMs hit by perfect storm:
– Strong US dollar
– Weak commodity prices
– Led to high inflation
– Led to tight monetary policy
Conclusion: – Too much debt
Growth • Russian and Brazil remain in recession
• Rebound in activity as currencies and commodity prices stabilize
outlook • Longer term outlook still strong
• Short term risks:
– Stronger US dollar
– US protectionism
– Decline in oil prices
 Currency Influences
US dollar • Strengthened over last two years due to
relatively strong growth, higher yields,
expected tightening of monetary policy
• Declined in past year due to revised
expectations of Fed policy
Increasing now due to expectations of new
Currencies •
fiscal policy
Euro Downward pressure due to ECB policy,
Dollars, Euros, •
expected easing of policy, expected shift in
US policy, pessimism about euro
Pounds Pound •
sustainability
Downward movement due to expected
drop in inbound foreign investment
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