PRESIDENT Donald J. Trump is the most hated political figure among the Democrats in the United States and very unpopular in most American media. But whether we in the Philippines like it or not, Trump could be in for the long haul and we should adapt to the new economic order he is espousing.
His America-first or American-only policy, initially frowned upon by leaders in the developed world, is actually paying dividends, as reflected in the strong US dollar and the record-breaking performance of Wall Street. Trump has been consistent in seeking a revision of the US international trade agreements with China, and Canada and Mexico in North America, and I expect more of the same in the next few years that will result in a new trading regime in favor of the US.
Trump has been persistent in his demand to correct the huge trade imbalances that the US has been incurring with major partners, while keeping in line with his promise to restore jobs that were taken out of America. He is rewriting the trading rules, discarding economic tradition and challenging the Washington Consensus long advocated by the International Monetary Fund, World Bank and the US Department of Treasury.
Trump was foremost a businessman before he became the chief executive of the most powerful nation in the world. As a businessman, he knew how things work in the
corporate world in terms of raising production and providing employment. Two of the economic policy prescriptions in the Washington Consensus, however, have failed the American people in Trump’s view.
The trade-liberalization program resulted in excessive imports and reduced exports that robbed many Americans of their jobs. Excessive deregulation, meanwhile, has either displaced or killed homegrown industries, resulting in increased unemployment.
Trump challenged these traditional policy prescriptions and proved that trade liberalization did not work in the interest of the US. (Entrepreneurs can take a lesson from what Trump is doing by trying and advancing out-of-the-box ideas to put the competition at bay.) The United States has lost its dominance in world trade and domestic jobs as well, with China threatening to take the place of America.
But the nationalist fervor has apparently endeared Trump to many American businessman and the ordinary citizens. The US economy expanded by a robust 4.2 percent in the second quarter of 2018, lifted by corporate spending. His move to reduce corporate tax is spurring investment and growth. Corporate profits increased to $72.4 billion, up from $26.7 billion in the first quarter.
The US jobs markets rose in August, led by construction, transportation, wholesale trade, finance and health care. The US economy added 201,000 new jobs in August, while the unemployment rate was steady at a low 3.9 percent. The hiring data will also likely boost Trump’s popularity—the average worker pay rose 2.9 percent compared to August of last year, the biggest increase since June 2009.
Trump’s saber-rattling and unorthodox handling of the trade issues with American neighbors, meanwhile, is producing positive results. The US and Canada reached a deal on a new free-trade agreement that will include Mexico after over a year of talks. The United States-Mexico-Canada Agreement updates and replaces the 25-year-old North American Free Trade Agreement, which Trump had threatened to repeal.
The updated agreement essentially committed Canada to open its dairy market further to US producers. Tariffs as high as 275 percent had kept most foreign milk, including the US, out of the Canadian market.
Trump’s different approach to trade negotiations has successfully worked. He is slowly delivering his promise to create and restore jobs in America. In doing so, the US president is creating a new global economic order where every nation, including the Philippines, must fit into.
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This piece first came out in Business Mirror on Oct. 9, 2018 under the column “The Entrepreneur.” For comments/feedback e-mail to: mbv.secretariat@gmail.com or visitwww.mannyvillar.com.ph./PN
