Singapore's future will be affected by a Trump Presidency and the domestic issues that arise from it.
The world is still reeling from President-elect Donald Trump's shock win during the 2016 American elections. This has gotten some Singaporeans to wonder, why do we care so much?
It’s because, while the United States is far away, they are a superpower whose domestic issues can affect Singapore. Here’s how:
1. The Trans-Pacific Partnership is Likely to End
Last week we wrote an article explaining the Trans-Pacific Partnership (TPP) and why it matters to Singapore. The TPP would allow for increased trade between 12 member nations (albeit with controversial concessions in areas like copyright law), and act as a counterweight against China’s influence in Asia.
The TPP would have given Singaporean businesses an opportunity to expand into a larger market, thus raising employment and wages. However, it was politically unpopular in the United States, due to American fears that the TPP would lead to unfair competition for their homegrown businesses.
Under the new circumstances, it seems the TPP isn’t fated to see the light of day.
While both Donald Trump and Hillary Clinton did not support the TPP, Clinton could perhaps have had a change of mind, as she supported it at first. Trump, however, has a protectionist stance (see below), which means he is unlikely to go back on his decision.
2. American Goods May Cost More, Thanks to Trump’s Protectionist Stance
Trump’s promise to “bring back jobs to America” means he needs to discourage “offshoring”. This is the practice of large companies to hire cheaper workers abroad, in order to lower costs.
America has tight labour laws with demanding requirements (like a high minimum wage), which makes American workers more expensive but not necessarily more productive than their foreign counterparts. This is what drives its companies to hire cheaper foreigners, and leads to accusations of “job theft”.
It remains to be seen how Trump will convince American companies to stop doing this. It could happen through hard measures, such as significantly raising taxes on those that employ too many foreigners, or softer measures like wage subsidies for American workers.
Nonetheless, products made in America will be more expensive than those made in China, or any country with cheaper workers. This will mean some American products (such as Apple, which outsources its manufacturing to China) may see a rise in cost.
3. Greater Volatility in the Stocks and Bonds Market
Because Trump is known to be unpredictable, businesses are not certain how to react to him. Most are unsure if his policies will benefit them or cost them. In light of this, stock prices and bond prices may be prone to sharp swings as he gets settled into his role as President.
Of particular worry is not Trump himself, but White House Chief Strategist Steven Kevin Bannon. Bannon was formerly part of the senior management at Breitbart, a notably right-wing site favoured by race supremacists. This has raised worries of racial tensions and political instability, which causes volatility and can discourage some foreign investors.
Safe haven assets, such as gold, are likely to grow in popularity during this period of upheaval.
4. Cheaper Energy
Donald Trump believes that global warming is a hoax perpetrated by China. As such, he has announced intentions to lift restrictions on industries that are traditionally considered unfriendly to the environment.
This means a likely rise in activities such as fracking and coal mining, or a possible rescinding of grants for electric cars or micro-generation. Micro-generators are people who use their own solar panels, or other methods, to generate some of their own electrical power. Some countries give out tax relief or subsidies for such schemes.
The upside to this is that energy will probably get cheaper, which translates to better margins for their businesses. Only time can tell if we’ll actually benefit from this.