China | Who will be Asia's winners and losers under Trump in 2017?
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Who will be Asia’s winners and losers under Trump in 2017?

Nigel Green January 8, 2017 6:55 AM (UTC+8)
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In just a matter of weeks, Donald Trump will enter the White House as the 45th President of the United States.

Naturally, his administration’s policies will have an impact across the globe.

Trump is a political firebrand and his rhetoric has helped placed him, in the eyes of most commentators, analysts and economists, as one of the biggest ‘headwinds’ for 2017. He will certainly be a dominant force in shaping a very different investment landscape in Asia than we have seen over the prevailing six or seven years.

Understandably, all eyes are on his relationship with China. In recent months, Trump has publicly attacked Beijing for ‘unfairly’ manipulating its currency, being lax on North Korea, slapping taxes on American goods, provoking military issues in the South China Sea, and questioned the well-established ‘One China’ policy.

And in what has been perceived as the ramping up of ‘tough talk’ between the world’s two largest economies, last week China slammed Trump over his use of Twitter to conduct international diplomacy in an op-ed published by the country’s main news agency.

In addition, China is “prepared to step up its scrutiny of US companies in the event Trump takes punitive measures against Chinese goods and triggers a trade war after he takes office,” according to Bloomberg.

It is my belief – and hope – that China-Trump tensions will significantly simmer down after he takes office. This is because a problematic relationship would have negative results for both countries.

Should there be a breakdown in ties, China’s economy would be hurt if Trump imposes increased tariffs on Chinese products and slaps restrictions on Chinese investors writing business in America. Whilst, American firms and consumers would lose access to China’s low-cost labor and cheap imports, and the US might no longer be able to borrow any more money from Beijing, which has lent more money to the States than any other country.

Yet whilst the China-Trump debacle remains wholly unpredictable and is likely to take center stage for 2017, there is an Asian nation that I am confident will do pretty well in the year ahead thanks to the President-elect’s plans.

This is Japan.

Trump has announced that his government will reduce the corporate tax rate from 35 per cent to 15 per cent and invest around US$1 trillion in infrastructure projects.

It can be expected that under these plans, the US economy would in the next few years go through something of a boom period. This would be positive for Japan as it would support Japanese exports to America. In addition, as Trump is likely to implement these pledges sooner rather than later, and the Federal Reserve is likely going to raise interest rates further in 2017, I expect the yen to remain weak against the dollar, which will be further good news for exporters. It is also advantageous for the wider Japanese economy as stock prices are also likely to be driven higher.

Japan is also now in a strong position to lead and direct, and subsequently benefit from, a new multinational free trade agreement, as it seems the once much-lauded Trans-Pacific Partnership agreement – which, crucially, excludes China and India – is going to fall by the wayside under Trump.

A new deal could take may forms, but one of the most likely would be the Regional Comprehensive Economic Partnership (RCEP) the proposed free trade agreement (FTA) between the 10 ASEAN member states and the six nations with which ASEAN has existing FTAs, namely, China, India, South Korea, New Zealand and Australia.

All this said, should Trump deliver his vow to impose tariffs on China, this would also adversely impact Japanese companies which have factories there or which are part of the extended supply chain to them.

However, the outlook for Japan this year is generally stronger than it has been for several years now. This is not only down to wider geopolitical issues in the US, but because Tokyo remains committed to boosting domestic consumption.

Asia goes into 2017 with many unknowns, with Trump perhaps representing the biggest question mark of them all. There will be winners and losers. Only time will tell who falls into which category.

Nigel Green
Nigel Green founded deVere Group in 2002 from a single office in Hong Kong after discovering a niche market for expats in the financial services sector. Since then, it has grown to become one of the largest independent financial advisory organisations in the world with offices and clients across the globe.
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