Stormy seas as Trump becomes president-elect
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- Published on Friday, 11 November 2016 04:48
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NOVEMBER 10TH, 2016
KATHERINE HARINE AMERICAS, OPINION10 COMMENTS
If there ever was a sound argument for increasing scrapping, the US election gave it to the shipping world with the election of Donald Trump as president.
In very simple terms, shipping depends on trade and trade depends on non-isolationism. The problem is not just President Trump; the problem is the belief of the US voters who elected him. The short-term prospect for shipping is dark, as is the medium-term. But the long-term outlook is good. Good because the world will finally realise that the United States should not be the leader of the so-called free world.
There are two problems with the Trump presidency. First is its isolationist policy. The second is its belief in the totally discredited trickle down theory of economic stimulation by tax reduction.
It is unlikely that nations will acquiesce to renegotiated terms of current trade agreements by a Trump administration. Countries such as Canada, Mexico, Germany, China et cetera see Trump as he really is, a bully. Hence trade wars are likely. The situation may be exacerbated by the fall of governments, such as Germany’s, due to a fall in exports. Isolationist governments may become more prevalent.
One question is to what extent will the United States continue or decrease its military activities around the world. Will various military exercises continue with countries in Asia, for example with Japan and South Korea? This is not clear yet. Trump has said he is against getting involved with various conflicts around the world; however, he has been one who is easily stirred up to retribution when he feels offended or challenged. It is very important to see how much the Trump administration meddles in the South China Sea.
Trump’s policy of tax cuts will not stimulate growth. What is needed are massive infrastructure projects funded by the US government. Will the Federal Reserve be inclined to keep interest rates near zero? That policy has been a failure but it is doubtful that the Fed will resist keeping rates low. The US may even slip into a recession within the next year. If the US falls into a recession, Europe and Japan will not be far behind.
The long-term benefit of a world which begins to stand up to the US is the fact that various nations and international institutions can develop backbones thereby producing a world of diverse economic and governance policies. Nations will not be as likely to join with the US in various wars to spread democracy, especially a democracy which has just proved itself to be in shambles.
The Chinese government is positioned well with its change of course in the last few years from an economy based on exports to one based on domestic consumption. Also China’s actions, such as the establishment of the Asian Infrastructure Investment Bank, will solidify growth of Asian economies. Asian nations that continue to align themselves with the US will be losers; hence, most will see the writing on the wall and begin to distance themselves from Washington.
A great deal depends on how much the people around and advising President Trump can keep him moderated. However, if his campaign is any clue, that will not happen in a crisis.
It is unlikely that the Trump administration will undertake any innovative policies. For example, it could put the brakes on fracking, ostensibly for environmental reasons but also to raise the price of oil. The current depressed price of crude oil has driven too many countries into recession. Nothing like this will happen as Trump himself will always put US interests above the rest of the globe’s. The price of oil will probably decrease, adding to the woes of many countries.
The story for shipping is the same as it has been for several years. Scrapping must increase. There is no hope for an increase in demand, absolutely none. Unfortunately, scrapping appears to have slacked off in the last few months. It must increase to a level even above what it was in the first half of 2016. The future prosperity is in the hands of the shipowners themselves.