Financial markets generally don’t like uncertainty. If Trump were to be elected POTUS, it’s difficult to see this being anything but a “bigly” headache for markets. Moreover, the way he has managed his campaign and the people associated with it suggests there might be a degree of chaos about the process of selecting and confirming key players in a Trump administration.
The immediate impacts will likely be seen in credit conditions, the exchange rate and the US sharemarket.
If US and international financial markets perceive the economic and political outlook to be more worrisome under a Trump presidency, this has the potential to push up funding costs as increased risk aversion leads to a deterioration in access to credit. Given the international linkages of markets, this could flow through to New Zealand retail interest rates, making household and business borrowing more expensive.
And on exports:
The US is a crucial market for many New Zealand firms. We exported $8.4 billion of goods and services there in CY2015, accounting for 12% of our total export revenue. Key products are beef ($1.6 billion), dairy ($1 billion), wine ($432 million), lamb ($288 million) and wood ($182 million), plus tourism (over 240,000 visitors).
Despite Trump’s assurances about how “great” or “terrific” the economy will be under his watch, his policy prescriptions don’t warrant a great deal of optimism in our view. Certainly, there has been no reputable economic assessment that shows just how his bright ideas will generate sustained productivity and living standards growth.
One estimate is that Trump’s trade policies alone – namely imposing 35-45% tariffs on Mexican and Chinese imports – could result in the loss of up to 4.8 million US jobs. Ouch.
If Trump’s economic policies result in a slower-growing US economy, either directly through poorly designed interventions, or indirectly via a loss in investment or hiring intentions from nervous firms (again, à la Brexit), we would expect the demand for New Zealand’s exports to drop.
His protectionism is possible his worse possibly, after nuclear proliferation.