1. President Trump: Implications
16 November 2016

2. Donald Trump won...but Hillary Clinton did not lose
Source: New York Times

3. Did Trump win or Clinton lose?
Democrat
Republican
Total Turnout
2016 (Clinton/Trump)
63.8
(47.8%)
62.1
(46.5%)
133.4
(53.6%)
2012 (Obama/Romney)
65.9
(51.1%)
60.9
(47.2%)
129.1m
(54.9%)
-2.1
+1.2
+4.3
Source: Wikipedia

4. A “rust-belt” strategy
Source: New York Times

5. How did Trump win?
MI, WI, PA, FL
OH, IA
Source: New York Times

6. Republican swept the Congress
Source: New York Times

7. Republicans win White House and Congress
Trump 290
Clinton 228
Popular Vote
Trump 47.3%
Clinton 47.8%
Senate
R-51 D-48
House
R-239 D-193
Clinton
Trump
Others
18-29 (19%) 55 37 8
30-44 (25%) 50 42
45-64 (40%) 44 53 3
65 and over (15%) 45 2
Source: CNN

8. Trump elected president by White Blue Collar workers in the Rust Belt
Critical Swing States
Electoral Vote
Trump (%)
Clinton (%)
Actual vote difference
Florida 29
49.1
47.8
119,770
Pennsylvania 20
48.8
47.6
68,236
Ohio 18
52.1
43.5
454,983
Michigan 16
47.3
11,837
Wisconsin 10
47.9
46.9
27,857
Total 93
682,683
Total US vote
60,371,193
61,039,676
668,483
Exit polls 8 Nov: Trade not immigration got Trump elected
Illegal immigrants working in the US should be allowed to apply for legal status? 70% of respondents said yes.
Support for the wall along the Mexican border? Only 54%.
Trump voters: top issue -- economy (46%); immigration 17%
57% of Trump voters say trade takes away jobs.
Source: CNN, BBC

9. Smoot and Hawley were both Republicans
US import volume fell 40% in the two years following Smoot-Hawley Act June 1930.
Since World War II, US took the lead in liberalizing trade and supporting globalization: established GATT (WTO), IMF and WB.
Prof Peter Navarro (UC-Irvine) Trump advisor said S-H is protectionist tariff but Trump’s is a “defensive tariff”
Source: Salvatore: International Economics, 10th Edition © 2010 John Wiley & Sons, Inc.

10. Market returns weak under Republicans (but markets chose to be bullish; for now)
Source: Phatra Securities

11. Good Trump vs Bad Trump Key policy issues Details *Trade
Renegotiate/withdraw from NAFTA (and WTO?)
Name China a currency manipulator (and impose punitive tariff)
Withdraw from TPP
Identify trade abuses that unfairly impact American workers and use every tool to end those abuses
*Tax
CIT to 15% from 35%
Simplify PIT and cut rates across the board
Repeal estate taxes
*Infrastructure
Increase infrastructure investment
Healthcare
Repeal Obamacare
Financial regulation
Repeal Dodd-Frank
Energy
Lift restrictions, allow energy investment/infrastructure

12. Trump tax cuts: deficit surges

13. Fiscal policy—personal income tax cut

14. Income distribution effects

15. Trump was a game changer

16. Thai vs US bond yields

17. Asia is dependent on trade
Exports to China (2014)
Export to China ($bn)
Rank
% of Total
Total exports ($bn)
Japan
131
1st
18.3
714
Korea
142
24.4
583
ASEAN
163
12.5
1,254
Thailand 30
240
Source: OEC

18. Protectionism up 10%  World GDP down 1
Protectionism up 10%  World GDP down 1.75%; World trade down 15% (IMF WEO Oct 2016)
IMF argues that a country (A) may have an incentive to impose tariffs. Its currency appreciates and household consumption rises (but GDP will fall from reduced investment).
Affected trading partner (B) will likely retaliate to reduce its trade deficit and offset earlier depreciation of its currency. But its exports and GDP fall.
Taking this to the global level IMF assumes protectionism from TBs and NTBs cause import prices to rise by 10% over three years.
Its model lowers global output and consumption by 1.75% after five years and 2% over the long run.
Global trade volume falls 15% after five years and 16% in the long run.
Rising import prices initially raise global inflation but after year four, a decline in demand lowers inflation globally in the long run

19. Investment implications
The fiscal policy, if implemented, is positive for US equity (at least in the short to medium term). The global equity could benefit from higher US demand. Commodity would also benefit from higher inflation and investment demand.
Higher inflation, growth
Lower CIT rate (despite winners and losers) would boost earnings by 23-30% easily
Rising bond yields, strong dollar are negative for bonds, defensive stocks,
But how much is already in the price?
Protectionism, if implemented, will be negative for global growth and particularly negative for EM and Japan equity.
Negative for growth and inflation in the US

20. How likely is the protectionism policy?
Key questions
How likely is the protectionism policy?
Net implications to the Fed fund rate? Will the Fed raise the rates?
How far the bond yield will rise
Thai bond yield? BoT?