Donald Trump’s largely unexpected victory in the 2016 US Presidential Election has injected a great deal of political-driven uncertainty in terms of US policy, international affairs, and economics. Given the experience and skills of billionaire-businessman Donald Trump, the priorities of his Administration should center on economic issues, such as tax, budget, and regulatory reform. Like Barack Obama, who sought to address economic issues such as the Great Recession and healthcare reform, Trump will likely be pulled away from areas where he is strongest thanks to pressing foreign policy and global security concerns.
Overlapping issues like trade will, therefore, receive a great deal of attention in the Trump Administration and offer Mr. Trump an opportunity to excel. While Hillary Clinton was anti-TPP as well, her once anti-free trade predecessor Barack Obama had been convinced to adopt TPP as means to balance the costs and benefits of tariff-free trade, which left open the possibility that TPP could be adapted and still adopted under a Clinton Administration. As such, Trump’s abandonment of TPP is probably the greatest source of political-driven uncertainty in the global economy. The so-called Brexit, i.e. the exit of Great Britain from the Europe Union, is probably the second greatest source of political-driven uncertainty at this time. The handling of the Brexit offers some useful lessons in handling US trade going forward.
Just as a majority of voters unexpectedly embraced the Brexit, then a significant, yet smaller, number of voters immediately wanted to reverse the decision, the rejection of TPP is part of a much larger movement inspired by anti-globalist and nationalist sentiments. Due to negative experiences with trade agreements like NAFTA and CAFTA, the American People have grown increasingly anti-free trade. At the same time, many Americans look at how much the United States has contributed to international governance and concluded the benefits do not outweigh the cost. Like the British, there are Americans, who want the US to thoroughly disengage from the world; whereas, there are others who want to rebalance Americas relations with other country in order to better address US interests.
Unfortunately, the handling of the Brexit is a major reason why it continues to be a significant source of uncertainty. Through the resignation of British Ambassador to the EU Sir Ivan Rogers, the world has learned there appears to be deficit in the negotiating abilities of Britain’s representatives. More importantly, the government of Theresa May seems to lack a clear vision for what the terms of the Brexit should be. Whether Great Britain’s economic ties with the European Union are going to remain largely what they are today or Great Britain is going to sever its ties with the Europe Union in favor of a complete reset with each EU country matters a great deal. In knowing the potential impact of the Brexit, uncertainty will be defused.
Given the seeming reluctance of voters on the Brexit and the reality that Britain’s economic interests are best served by largely maintaining Britain’s current economic policies, the best course of the May government is to favor a recalibration of British-EU relations instead of an abrupt breakaway. Similarly, the Trump Administration should cater to the middle by seeking out economic and trade policies that recalibrate current policies to better serve the interests of the American People. While there may be those who want to see dramatic changes, ideological splits and inevitable reversals of unbalanced solutions necessitate middle ground solutions. At the very least, the May government and the Trump Administration should seek to offer greater clarity on what they intend to do in order to defuse economic uncertainty.
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