President Donald Trump’s trade policies could break down the world trade system as we know it, and pressure some countries chose between China and the United States, Michael Every, an expert in financial markets dynamics from Rabobank, said earlier this week.
Every noted in a recent interview that since Trump’s White House continues to push for protectionist trade policies, the global trade landscape could soon morph into something else. After the United Kingdom’s exit from the European Union and Trump’s election, global trade relationships could face major changes as the world heavily relies on the U.S. dollar for trade.
Every believes Trump is approaching the U.S. economy and trade from a businessman’s perspective. This is why he apparently tries to sell more things than buy. Yet, other countries may seek the next currency to turn to to fill the void left by the U.S. dollar. The economist noted that America has put free trade under “extreme pressure.” Every thinks that unless the U.S. runs a massive trade deficit, the current global trade system as we know it would break down.
Every cautioned that “ridding out” Trump won’t solve the problem. He thinks the President is just the “leading edge” of where we’re heading to. Every thinks the phenomenon is a global trend caused by the ever-widening gap between the poor and the rich and weak demand.
He forecast that Australia, which is bound to the U.S. on a cultural level and bound to Asia on an economic level, might have to pick between the U.S. and another major trade partner, China. Every thinks Trump’s policies would lead to the emergence of trade blocks, one of which is Asia. And if Australia chooses Asia over the U.S. and starts using China’s currency instead of the U.S. dollar when trading, it might have long-term political implications.
The analyst thinks that countries such as Australia should not step back in the face of the U.S. political trends. They would benefit more from doing business with China. Every recalled that it is not the first time global trade has “fractured”. Australia currently thrives on China’s demand, but uses the U.S. as a security umbrella.
The expert advises Australian exporters to expect visible fluctuations in the exchange rate, with the U.S. dollar skyrocketing and the Australian currency collapsing by as much as 15% in the worst-case scenario. In the meantime, Asia currency could sink even lower, Every predicts.
Global trade has seen some rough years since the 2008 economic crisis. People in the West lose their jobs to machine or foreigners willing to work for less. Old industries vanish and immigrants are competing for jobs.
World’s trade flows have lost momentum, and trade deals are being dismantled. Donald Trump has threatened to impose special tariffs on Mexican and Chinese goods because these two trade partners allegedly “stole” U.S. jobs. Trump once said that China was “raping” America on trade.
What’s more, Peter Navarro, a long-time China critic, is currently heading Trump administration’s National Trade Council. Plus, the president just withdrew the U.S from the Trans-Pacific Partnership. So, the future of the free trade looks indeed gloomy.
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