Like it or not, Trump’s back in charge for the next four years, says Mark Mobius, chairman of Mobius emerging opportunities fund in his latest blog.
Donald Trump’s clear win in this year’s US election reflects not only many Americans’ frustration with the current government but also signals broad support that strengthens his influence both at home and abroad, potentially paving the way for sweeping reforms.
His nationalist, protectionist policies and blunt, often abrasive rhetoric obviously don’t sit well with everyone. But his pro-business stance has the potential to boost not only the US economy but also markets worldwide.
One major issue for businesses is over-regulation. By rolling back some of that red tape, Trump’s planned push for deregulation could significantly bolster market confidence and even increase overall economic productivity.
Picture above shows Mobius at Mount Rushmore National Memorial, which features 60-foot faces of four former US presidents: George Washington, Thomas Jefferson, Theodore Roosevelt and Abraham Lincoln.
Trump has put a big spotlight on tariffs, even telling Bloomberg that he thinks “tariff” is the most beautiful word in the dictionary. On the campaign trail, he’s threatened to slap 60% tariffs on all Chinese imports and 10%-20% tariffs on goods from other countries.
But whether these promises actually come to life is another story. (We all know what happened with that “big, beautiful” border wall that he said he would make Mexico pay for in his last term.)
Trump prides himself on being a successful businessman and dealmaker. Many market commentators seem to believe that instead of enforcing tariffs and sparking a full-blown trade war, he might simply negotiate trade deals that check a few boxes without triggering serious economic blowback.
Personally, I see significant upside to the US imposing hefty tariffs, as they could pressure trading partners to ease their own restrictive trade and investment policies, ultimately opening the global economy. Higher tariffs won’t necessarily mean higher consumer prices when we factor in adjusted supply chains, reduced business costs from cutbacks in government bureaucracy and lower corporate taxes. This combination could even allow US businesses to reduce prices.
Another substantial cost in global business is the restriction on using the US dollar and the compliance expenses tied to US money transfer regulations. A more open currency market could help reduce these costs, potentially lowering prices further.
It’s also worth noting that importers and exporters can adapt to tariffs by creating new supply chains, adjusting pricing strategies, among other methods. More importantly, tariffs can increase government revenue, which could help reduce the budget deficit and, along with spending cuts, lower overall government expenditures.
China has its own tools to stay competitive. It could devalue the renminbi to keep exports attractive. Meanwhile, Chinese companies are already adapting, moving production to places like India to sidestep tariffs. So I don’t expect China to take a major hit — they have the flexibility to respond to whatever the Trump administration throws their way.
In the end, Trump’s protectionist stance may even create benefits beyond US borders. With the US being the world’s largest economy, its growth tends to lift other markets as well, boosting trade volumes and encouraging global businesses.
Whether you love or loathe Trump’s policies, his approach will keep the world’s largest economies on their toes. Ultimately, Trump’s policies might stir up some friction, but they’re unlikely to throw growth off course. Markets will adjust, companies will adapt, and, as always, the global economy will find its balance.
