Business World

Thursday 8 December 2016

President Trump 'is a bigger risk to trade than jihadi rise'

Published 19/03/2016 | 02:30

US Republican presidential candidate Donald Trump
US Republican presidential candidate Donald Trump

A Chinese hard landing, a Donald Trump Presidency and a fractured European Union are the big threats facing the world economy, according to the Economist Intelligence Unit.

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Warnings are also sounded about the prospect of a British vote to exit the EU, armed conflict in the South China Sea, and the onset of a new cold war fuelled by Russian aggression.

But the potential for Donald Trump to make it to the White House is a scarier prospect than the rising threat of jihadi terrorism, a Brexit or a future oil price shock, the London-based organisation said.

In the latest assessment of global risks, researchers said the biggest worty is that China's economy will implode.

The Unit said continued deterioration in the country's services and manufacturing sectors, the ongoing build-up of the country's debt stock, now equivalent to some 240pc of GDP, and continued capital outflows have highlighted structural weaknesses in the world's second biggest economy. And that has led to depreciation in the yuan's exchange rate against the US dollar.

"Given the growing dependence of Western manufacturers and retailers on demand in China and other emerging markets, a prolonged deceleration in growth there would have a severe knock-on effect across the EU and the US - far more than would have been the case in earlier decades," it said.

Second among the risks are the prospect of a new cold war sparked by Russia's interventions in Syria and Ukraine, while worries about currency volatility and a collapse in investment in the oil sector also make the list.

Perhaps the most eye-catching risk is the prospect of Donald Trump being elected US President. If a Chinese hard landing is the biggest risk, ranked at 20, a Donald Trump Presidency is at 12, worse than a British withdrawal from Europe, and the rising threat of jihadi terrorism.

The Economist points out that Mr Trump, the Republican front-runner, has been hostile towards free trade, and has repeatedly labelled China as a "currency manipulator".

"In the event of a Trump victory, his hostile attitude to free trade, and alienation of Mexico and China in particular, could escalate rapidly into a trade war - and at the least scupper the Trans-Pacific Partnership between the US and 11 other American and Asian states signed in February 2016," the forecasting points out.

"His militaristic tendencies towards the Middle East, and ban on all Muslim travel to the US, would be a potent recruitment tool for jihadi groups, increasing their threat both within the region and beyond."

Mr Trump's success so far has spooked many in the Republican party's top ranks, who are appalled at his incendiary rhetoric and reject policies such as his vow to deport 11 million illegal immigrants, temporarily ban Muslims from the US and build a wall along the Mexican border.

'The Economist' said that while it does not expect Mr Trump to win against Hillary Clinton, it could still happen.

And then there's Brexit. The research firm said an exit from Europe would have a negative effect on Britain, which is the world's fifth biggest economy.

"However, it would also harm the EU itself, given that the UK is one of the few relatively fast-growing economies in Europe, and has also been a leading proponent of trade and services liberalisation.

"Finally, the shock of a 'Brexit' could also exacerbate the ongoing global currency instability, notably in the West."

Irish Independent

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