Donald Trump steamrolled his way to the White House by making big, sometimes vague, sometimes too-good-to-be-true promises regarding the many fantastic policies and initiatives he would introduce if he were elected president. Now he’s in the White House, he’s discovering that it’s much easier to say you’ll do something rather than actually do it. So how is Donald Trump getting on with his big hitters? Let’s take a look.
Ah, the wall. Some days it was spoken of as an actual wall, some days (post election) it became more of a metaphor. Still, there are plans afoot to build a wall that would create one big barrier between Mexico and the United States, and some (pretty out there) proposals have actually been put forward. Even if Trump is keen, the logistics of the wall might prove to be too much, with high costs and environmental issues keeping the spade out of the ground for years. And Mexico paying for it? That’s looking unlikely too.
We’ll say this: you can’t accuse Donald Trump of not trying to enact some of his anti-Muslim rhetoric into law. Though he had the drive, plan, and pen to sign the executive order that would ban Muslims from entering the United States. Unfortunately for Trump – and fortunately for everyone else – the proposal was quickly shot down by immigration lawyers. So there was no immediate travel ban, though he is still trying to get something through the courts.
Bringing Back the Jobs
If you had lost your manufacturing job to an overseas worker, you would probably vote for a man for told you he was going to bring it back. And that’s just how Donald Trump spoke to many millions of former manufacturing workers who had fallen on hard times. The problem is, those jobs don’t exist anymore. Even if they were brought back, the jobs would be automated; the United States will never have a manufacturing workforce like it used to have. It’s as simple as that.
The Trade Agreements
Trade was a pretty big deal during Trump’s campaign. He talked of NAFTA as ‘the worst trade deal in history’ and was critical of the proposed TPP. This actually had some bipartisan support, and many people were actually rooting for these deals to be renegotiated. However, Trump overlooked one fact: NAFTA is incredibly complex, and any renegotiation would take years. He will try though.
This is one area where Trump has followed through with his plans (it’s just a shame many economists and business leaders don’t think it’ll work). He’s cutting the top rate an individual would pay from nearly 40% down to 35%. All businesses will also now pay 15%, which is dramatically lower than what it used to be.
After his first 100+ days in office, Donald Trump would get a C. He tried hard and failed at some things, didn’t try whatsoever in some other areas. Let’s see how the rest of the year shapes up, but at the moment it’s looking like he won’t be living up to his past promises.
Weathering the Storm: How Political Climates Affect the Financial Markets
There are numerous factors that can potentially have an effect on financial markets and which traders have to be aware of. They can range from extreme weather events, terror attacks, corporate announcements, all the way to the political climate of a country. In most of these scenarios, the ramifications for an economy and the subsequent reflection in the stock markets can be relatively predictable – we expect to see a drop in stock prices when a disaster hits , for example. When it comes to the political climate, however, things become a whole lot less predictable. This is due to various reasons, not least because of the inherently fickle nature of politics itself and the sometimes vast differences in the political cultures and traditions of different countries.
To get a sense of just how a country’s political climate can affect various aspects of a nation’s economy and its financial markets, we’ll take a practical recent example of the USA following President Donald Trump’s election in November 2016. It serves as an interesting case study due not only to its unexpected nature which highlighted the basic unpredictability of political climates, but because it brought about some very interesting reactions and results from businesses and the financial sector in general.
A general statement can be made to the effect that a country’s political climate and its economic environment are closely related. Investors, no matter how large their risk appetite, like to have a reasonable assurance of their money’s safety, which is why stock markets are usually the first industries to react to any political climate changes. In fact, research suggest that stock markets follow a predictable general pattern along a four-year cycle punctuated by the Presidential Elections in the USA and perhaps many other countries worldwide, with the market showing signs of increased caution as election season comes around.
Following President Trump’s unexpected victory, many organizations held the hope that the bold fiscal proposals he had talked about during the campaign – including increased spending and tax cuts – would serve to boost the country’s economy. The Federal Reserve actually went ahead and increased interest rates in anticipation of the changes, showing how even the promise of a policy change will directly be felt on the financial market.
Anticipated Regulatory Changes
When a country undergoes a significant political change of pace, it is expected that this will come with significant regulatory standards and practices. It is widely acknowledged that increased government regulation and bureaucratic interference in a country’s economy and industrial activity will usually result in a slowing down of the economy in question.
President Trump had poised to relax the regulatory framework in the country as well as consolidating the numerous bodies tasked with formulating the regulations to make it easier to do business in the country, and this came as good news to organizations and their stakeholders.
Political Stability Concerns
Political stability has a very real effect on the state of businesses within an economy, as we can all agree. While many business owners and stakeholders were encouraged by the promise of deregulation and fiscal policy reform, many were also given cause for concern when it came to the President’s apparent pattern of unexpected and inconsistent policy decisions.
His stance on immigration, promise to wall of the USA’s southern border with Mexico, and his abandonment of previous trade deals all went into fueling anxiety and a sense of uncertainty in the financial markets. This was especially felt in the case of organizations with a global business presence. These feelings decrease investor confidence and often lead to a depreciation in stock market values as the more risk-averse investors keep away.
When looked at in totality, countries all over the world face the same types of political risks. We’re not talking about complete government collapses such as might occur in times of a coup, but relatively smaller yet high-impact moves and policies by governments on matters such as regulation, currency valuation, taxes, spending, minimum wage laws, labor laws, environmental regulations, and the like.The financial market of a country, being highly sensitive to such shocks, can register an impact when such actions are merely proposed, without their implementation having taken place yet. The impacts may be long or short-term, but they are definitely felt throughout the financial markets.
What a Rising Xi Jinping Means for China and the World
“Watch this man.” These were the three words used by the founding father of Singapore Lee Kuan Yew to describe a relatively unknown Xi Jinping while he was yet to become the President of the People’s Republic of China. Today, in addition to being China’s “paramount leader”, Xi is arguably the most powerful man in the world, and even if leaders across the world were doubtful about it till now, the developments in the previous week were sure to make them think again.
19th Party Congress: How it unfolded
Xi today, Xi forever?
The Communist Party of China assembled the previous week for its 19th Party Congress, a political summit that takes place every five years to decide upon the country’s future and the future is precisely what Xi has fixated his eyes upon. According to the current rules, Mr Xi must step down as the leader when his term ends in 2022 and as tradition dictates, a successor must be appointed. While only time will reveal whether Mr Xi steps down from the presidency at the end of his term, it increasingly looks that he is not keen to do so, having failed to hint towards any successor for the time being. His apparent intentions to stay put were further solidified with the appointment of the new members to the Politburo Standing Committee, the highest decision making authority in the country after the president. Each of the members appointed to the body is over 60 years of age, which means that they are highly likely to retire when their term comes to an end with the next meeting five years later. Interestingly, two-thirds of them are also known to be Mr Xi’s loyalists.
Xi Jinping Thought: A force to be reckoned with
“Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” or the “Xi Jinping Thought” for short was written into the party’s constitution at the end of the Congress. The thought consists of 14 principles calling for deep reforms, conserving the environment, the party’s complete control over the army, and the importance of the unification of the country. The development was highly publicised and with good reason. With the “Xi Jinping Thought” embedded in the constitution while still being in power, Xi Jinping has drawn comparisons from all over the world to Mao Zedong himself. Moreover, he has ensured that anyone that opposes him will do so at the cost of their removal from the party. When Xi asked the delegates at the end of his address for any objections, shouts of “meiyou” which means “none” rang through the Great Hall of the People.
Mr Xi has declared the start of a “new era” for China, and undoubtedly for the entire world. It is therefore important to ask what significance these developments hold for the country and for the world at large.
What this means for China
The inclusion of Xi’s thought in the constitution means that the same will be taught in schools, colleges, and other institutions throughout the country, infusing his ideology among the Chinese on a cultural level. Abraham Denmark, director of the Asia program at the Wilson Center puts it aptly when he says that the move “greatly increases, … broadens, and deepens Xi Jinping’s personal power within the Chinese system”.
The president has already found a wide support of the Chinese population with his push for modernisation and his crackdown on corruption has been hugely popular among the masses. Since his election in 2012, Mr Xi’s anti-corruption drive, famously known within the country as the “tiger and flies campaign” has either disciplined or expelled nearly a million party members. As his stance on corruption remains as stern as ever, many have come to view it as a political tool used by him time and again to get rid of political rivals. However, the corruption drive has undoubtedly proved to be effective and fruitful for the country’s business climate.
While Mr Xi’s crackdown on corruption has garnered immense coverage, the crackdown on humans rights activists and NGOs has not received its fair share. China has struggled for decades in its battle for free speech. In 2015, many human rights lawyers were detained and many international NGOs faced stricter curbs to keep them from functioning. As the president has left little room for any opposition within the party, the authoritarianism and censorship are by no means expected to be relaxed, ensuring that there is no opposition from outside the party as well.
Powerplay: China’s standing on the global stage
Donald Trump was among the world leaders who wished the Chinese president when he congratulated him on his “extraordinary elevation”. The reverence he holds for Mr Xi was quite apparent when he said: “some people might call him the king of China.” The surprise, however, came when North Korea’s Kim Jong Un congratulated the president on his “great success” since the two leaders are not known to be fond of each other. The intent here is clear. Both sides need a China that is continuously growing in power on their side in their stand against each other, and that means a closer association with Mr Xi. Chinese influence in the world is unlikely to stop there.
While speaking to CNN, James McGregor, author of “No Ancient Wisdom, No Followers: The Challenges of Chinese Authoritarian Capitalism”, mentioned that “given the chaos in Washington and also the dysfunction in Europe, the world is looking for leadership.” Mr Xi enjoys a great level of stability and largely unquestioned authority in a time where the leaders of Western democracies face intense competition at home. As such, his message to his party and to the world is clear: in the coming decades, China will “stand proudly among the nations of the world” and “become a leading global power. ” However, it will do so on its own terms, emphatically rejecting the Western political models.
These intentions are perhaps best evidenced by The Belt and Road initiative, China’s attempt at connecting Europe, Asia, and Africa with each other through a modern take on the Silk Route, into which it has already pumped hundreds of billions as loans and aid to countries across all three continents. While the project has been met with opposition from Japan, India, and the USA, many of China’s neighbours have expressed their support for it, which speaks of its influence on the global stage.
With the people’s army under the control of the party, Mr Xi also looks to achieve the twin goals of increasing the military might and the protection of China’s sovereignty. “We will not tolerate anyone, using any means, at any time to separate one inch of land from China”, he said in his address which is seen as a warning to both Hong Kong and Taiwan. Enhancing combat capability is also linked to the Chinese interests in the South China Sea, where its activities of building and militarisation of islands have received backlash from the international community.
“If one is big”, Mr Xi said on the final day of the Congress, “one must act big.” There’s no doubt that Mr Xi intends to put these words into action at the global level. Lee Kuan Yew once rightly pointed out about China that the world would do well to remember: “The size of China’s displacement of the world balance is such that the world must find a new balance. It is not possible to pretend that this is just another big player. This is the biggest player in the history of the world.”
UK Attempts To Bypass European Commission On Brexit Blocked By Brussels
As the UK and EU draw deeper and deeper into uncharted waters, Brexit negotiations are becoming increasingly erratic. As negotiators from both states met this week to discuss items such as the Northern Ireland Border, the rights of EU citizens currently residing in the UK and the notorious ‘divorce bill’, there have been numerous reports of frustration within the British camp.
Recently it was revealed that Prime Minister Theresa May, believing talks to be at an impasse, intended to go over the heads of the EU’s Brexit negotiators and appeal directly to world leaders such as Angela Merkel and Emmanuel Macron. When questioned about this, however, Brussels officials close to the negotiations intimated that Mrs May would not be able to circumvent the negotiations process.
The officials pointed out that both French and German leaders had agreed prior to the talks that negotiations would come “as a single package” where “individual items cannot be settled separately” and that no member state would abstain from negotiations in favour of individual agreements.
One year on…
It has been over a year now since the UK referendum in which the country voted (at a rate of 52% to 48%) to leave the European Union in an unprecedented political and economic chain of events, the repercussions of which will take years to fully realise but which the world glibly knows as Brexit. It’s a small name for such a political leviathan. Many of the world’s leading bankers and economists still aren’t sure what to make of. Recently CEO Lloyds Bank Antonio Horta-Osorio (who has been lauded for restoring the bank’s profits to pre-financial crisis levels) expressed doubt and uncertainty over the long term economic effects of Brexit. It’s somewhat telling that former Prime Minister David Cameron resigned shortly after the vote, claiming that his involvement in the ‘Remain’ campaign put him at odds with the will of the people but it’s possible that he had the prescience to realise that he had no hope of taming this wily and unpredictable beast. One year on, the beast only seems to have become further enraged by the negotiating process.
Theresa May has gone into Brexit negotiations with some questionably aggressive negotiating tactics. The first round of talks were mired by her strangely audacious assertion that “no deal is better than a bad deal”. The frustration has clearly been felt on both sides with chief negotiator Michel Barnier urging Mrs May to begin negotiating “seriously”. The French government also demonstrated an unwillingness to circumvent negotiations earlier this week, stating that it “fully supports, on the substance as well as on the method, Michel Barnier’s negotiating mandate” and asserting that claims that Mrs May can somehow bypass the procedure “are founded on absolutely nothing and do not reflect reality”. Brexit Minister David Davis, however, retains an optimistic tone, stating;
“Our goal remains the same: we want to agree a deal that works in the best interests for both the European Union and the United Kingdom and people and businesses right across Europe. We’re ready to roll up our sleeves and get back to work once more…”.
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