Trump’s Uncertain New World
The only certainty about Donald Trump’s incoming administration is the uncertainty that will attend it. Remaining unpredictable may be a successful tactic in business, but it is an unsettling, even dangerous, trait for a US president.
MEXICO CITY – The only certainty about US President-elect Donald Trump’s incoming administration is the uncertainty that will attend it. Remaining unpredictable may be a successful tactic in business, but it is an unsettling, even dangerous, trait for the leader of the world’s most powerful country. This is especially true with respect to three sensitive policy areas.
The first is the US economy and its impact on all other countries’ economies. If Trump cuts taxes and manages to enact a massive infrastructure program, America’s budget deficits will rise, perhaps dramatically. This, together with the Federal Reserve’s gradual interest-rate hikes, will strengthen the dollar, weaken so-called emerging-market currencies, and shift money from the rest of the world to the US.
As Latin American, Asian, and African countries’ currencies depreciate, their reserves will plummet or their own interest rates will spike, and inflation will rise. For economies that have been barely holding on since the recent commodities boom ended, this is a worrying, if not terrifying, prospect.
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