In most elections — like life, really — things are never as bad or as good as they seem, no matter the result. But Donald Trump’s victory is a rare case of an event that is every bit as bad, and possibly worse, than it seems for a country like Australia.
Australia is an open economy heavily reliant on exports, mainly of commodities, but well-positioned next to the fastest-growing region in the world. We depend on international stability and open borders to drive our economic growth. Trump is bad news for all of that.
The short-term result is already evident — stock markets tanking across the globe; the ASX 200 is down over 2%, after recovering from a precipitous fall from around 1pm. Bad news for your superannuation returns, of course. But like Brexit, the initial shock falls will give way to much heralded “relief rallies”, even though the long-term effect is likely be lower returns for shareholders.
The longer-term implications are much worse.
First, Trump immediately brings dangerous insecurity to the world. He has committed to, literally, abandoning US allies in our region, such as South Korea and Japan. Suddenly, they will be left to face the problem of nuclear-armed North Korea, and an expansionist China, virtually alone. The Putin regime — strongly suspected of using espionage to assist Trump’s cause during the election — will be emboldened, particularly given Trump’s declaration he would abandon America’s NATO commitments in Europe. There’s now a very real risk that Russia will be tempted to test NATO’s resolve to defend the Baltic states.
However, Trump has promised to be far more economically aggressive toward China, likely bringing those two powers closer to open conflict in our own region. That region is likely to respond by redirecting more spending into their militaries — and their equipment will, unfortunately, not be made from Aussie steel like the Turnbull government’s promised submarines.
Trump is also aggressively protectionist. He is not merely opposed to preferential trade agreements like the Trans Pacific Partnership — now a dead letter — but has promised to tear up existing trade agreements America is party to. While this will have minimal economic consequences in itself — the kind of bilateral or trilateral preferential trade agreements that have been in vogue since global trade negotiations became gridlocked have few economic benefits and merely tend to redirect trade — it is likely to lead to a significantly higher risk of the return of overt protectionism and tariff barriers around the world. With a President Trump committing to virtually force manufacturers to locate in the United States, other countries will be emboldened to do so as well, even if Trump finds a GOP-controlled Senate and House more free trade-minded than he is. An actual 1930s-style trade war is now a much greater possibility.
For a country that relies on international stability and trade flows, it’s bad news. But it gets worse.
Trump is an overt climate denialist — indeed, an active climate conspiracy theorist. Despite constant opposition from Republican denialists, Barack Obama was able to move the US forward on carbon emissions abatement, despite the lack of a carbon price. Under Trump and especially backed by a Republican-dominated congress, the US will return to being a climate laggard rather than a leader, and with far greater consequences than when a comparatively small country like Australia plays laggard. The consequences are likely to be a significant diminution in the chances of effective emissions abatement, and an increased likelihood of climate change reaching dangerous levels more quickly.
For a country like Australia, which is more vulnerable to the economic impacts of climate change than virtually any other developed country, it’s bad news indeed.
Read the local business press this morning and you’ll see some attempts to find positives for Australia. Tony Boyd, for example, clutched at the straw that Australia could act as an “intermediary” between Trump and China. Don’t be fooled. The only hope is that Trump fails to keep the majority of his commitments and oft-expressed pledges — that Trump as president becomes the mellower, more moderate and mainstream figure he was supposed to become after the primaries were over. Given Trump’s now won the election by refusing to mellow, how likely is that?
The only possible upside for Australia is that a relatively large pool of educated, skilled progressive workers from the United States might now be looking for a wealthy, Anglophone democracy to move to. For an agile, innovative economy like Australia, it’s a no-brainer that we should be trying to encourage them to move here, starting now.