Hong Kong

HONG KONG — The world’s second largest economy and America’s largest trading partner greeted the news of a Trump presidency with scant enthusiasm.

As the Republican candidate gave his victory speech, Chinese state-run media Xinhua posted a few short paragraphs on the new President-elect saying Beijing expects “to make joint efforts with the new U.S. government to maintain sustained, healthy and stable growth of China-U.S. relations, and benefit people of the two countries and the world.”

In terms of countries Trump has promised to go after, China is only second to Mexico — so little wonder the Chinese government’s statement was tepid at best.

The Transpacific Partnership, or TPP, is sure to be off the table now. Trump had repeatedly stated on the campaign trail that he would nix any such trade deal. It will be several more months to see how many of Trump’s protectionist policies will actually be pursued or whether his remarks will fade as heady campaign rhetoric.

“Mr. Trump’s protectionist policies may prove another big step back in the gradual unwinding of goods globalisation that has defined the past 30 years,”said Nomura analysts Yiran Zhong and Rohit Thombre. “History tells us that once protectionist measures are brought in they are usually remarkably difficult to scrap.”

The two stated that they believe a Sino-U.S. trade war is “a real possibility” under a Trump presidency.

“In general, the cost of doing business would likely rise,” Nomura said. “Our economists also expect inflation overall to ride an uptrend. We also see the demise of TPP negatively, as we believe that it had the potential to be immensely beneficial for the development of poorer Asian countries where a lack of proper legal recourse is one of the major hurdles to investment.”

“The direct effect of protectionism will be that imports tariffs are very likely to be imposed on Chinese imports, which is of course bad for China,” Nataxis Asia Pacific chief economist Alicia Garcia Herrero said.

However, there may be a silver lining.

“The indirect effect is, positive, though goes in two main directions,” Herrero continued. “First, the Transpacific Partnership will not be passed through a Republican Congress, which will create additional space for China to sign either regional or bilateral agreements with other Asian economies (e.g. RCEP). This is by no means far from reality as China has already taken steps towards a regional trade agreement in the light of the increasing doubts on TPP being approved.”

“Second, a more protectionist U.S. even with neighboring countries, Mexico being the best case in point, will help China improve its economic ties with countries long under strong U.S. influence. All in all, given the increasing share of Chinese exports to emerging economies, and in particular emerging Asia may well counterbalance the reduction in exports to the U.S. as the share of exports to emerging economies are already nearly double that of the US,” Herrero said.

Ronald Chan, Manulife Asset Management’s chief executive officer of equities Asia ex-Japan, also forecasts the dispersion of trade relationships over the medium to long-term.

Chan believes that with Asia’s role in the global economy strengthening, the world will move to a “multi-hub” economy, with centres in North America, Europe, and Asia.

He said: “Many countries in Asia historically depended on exports to consumers in developed markets for economic growth. This dynamic is gradually changing as Asian countries are less dependent on net exports to drive growth. Export-dependent countries, such as China, Korea and Taiwan, are transitioning to service economies with greater consumption, while countries across the region are witnessing an increase in the middle class.”

“There’s still a lot of pump priming that China can do, e.g. infrastructure spending, consumer-led or housing policies, which could be put in place in case the market situation deteriorates,” Chan added.

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