By Brett McCreadie, Senior Consultant
The US presidential election has been run and won, resulting in an unexpected victory for Donald Trump. Unexpected because the main-stream media polling conducted ad nausea during the election, which persistently indicated a positive result for the Democratic candidate Hillary Clinton.
Worth noting among the results are surprising upsets in a number of states. The ‘Rust Belt’ region of the US, traditionally characterised by declining industry and a falling population, especially in the American Midwest and NE states and generally in the great lakes region, was perhaps the greatest failure of the Democratic Party’s 2016 campaign.
This region, in particular Ohio, Pennsylvania, Wisconsin and Michigan, has historically been considered a Democratic bastion due in large part to the influence of labor unions throughout the factories and workshops prevalent in the manufacturing industry. All four states have consistently supported democratic presidential candidates, and on election night 2016, all four returned majority votes for Donald Trump. The failure of these states to deliver unqualified support to the Clinton campaign contributed greatly to the eventual success of the Republican Party.
Without the support of traditional Democratic voters, the Clinton campaign could only watch as the American people delivered handsome majorities in both the Congress and the Senate to GOP members. Essentially, this means there will be no Democratic ‘check’ on the balance of Republican legislation that will follow the new Congress taking office in 2017.
The Trump campaign flagged a wide range of policy outcomes during the election. Many of these will have an impact on Australian foreign policy, trade and commerce.
These may include; defence affairs – where a reduced US presence in Asia may embolden the Chinese military in ongoing disputes like those in the South China Sea, and climate change – where any moves to defund and reduce the US government’s climate change policy footprint could provide ‘cover’ for similar political moves in Australia.
But undoubtedly the biggest potential impact for Australia would be in the area of trade and commerce.
Trump has indicated his infrastructure investment proposals for US roads, bridges and airports may range from US$500 billion to US$1 trillion over a decade. If it happens, this plan could have tremendous potential for supporting job creation in the short term, and great expansion of the US economy in the medium to long term.
What remains uncertain is the impact a 45 per cent tariff on Chinese-manufactured products will have on the US economy, particularly domestic prices for such products. And equally uncertain would be the Chinese response. It may well usher in a trade war, invoking the potential for recession - but equally so, it may well see the Chinese drive up their own investment in infrastructure to compensate for a fall in trade with the US.
Any Chinese increase in infrastructure investment would have a positive flow on effect for Australian exports of iron ore and coking coal, used in the production of Chinese steel. Together with the rally in commodity prices experienced in Australia over the past six months, a resurgent domestic mining industry will deliver nothing but good news to Australian budgets and treasury coffers.
Further impacts such as those of the TPP, and Australia’s FTA with the US will no doubt remain to be seen.
For now, Australia will continue to wait with other US trading partners for announcements of the new administration’s trade policies.