Trump will be dangerous for Asia say analysts

A Trump presidency would no doubt hurt Asia's GDP growth and could ultimately drive cost-push inflation, impart smaller trade surpluses, and looser macroeconomic policies an analysis by global markets research report, Nomura.

Nomura's "what if" exercise uses Donald Trump's main campaign pledges to assess risks from protectionism, regional security, and US macro policy.

Because Trump has said conflicting things during his path to securing the Republican presidential nomination, it's hard to actually predict what will happen. But it's interesting to consider some possibilities, said the analysts.

Nomura analysts assign a "high probability" to the possibility of Trump declaring China a currency manipulator and to his pursuing more aggressive trade policies. They also note that geopolitical tensions could increase.

"In short, a Trump presidency may lead to a smaller trade surplus and more capital outflows due to increased trade frictions and geopolitical risks in the region," Nomura analysts Yang Zhao, Wendy Chen, and Chang Chun Hua said. "However, we believe the impact should be limited, as China and the US have more common interests than conflicts in the region."

Plus, while they note that a trade war is "possible," they note that the potential for a "full trade war is low." And even if there is one, they said, "it would unlikely lead to a collapse of fundamental cooperation between the two nations."

"In Southeast Asia, we believe the Philippines' economy stands to lose the most if Mr. Trump wins the presidency," Nomura's Euben Paracuelles, Brian Tan, and Lavanya Venkateswaran said.

On the economic front, they said, "if US immigration policies tighten, leading to fewer migrant workers, this could impact remittances inflows back to the Philippines."

"The US is host to 34.5% of the total overseas Filipino population, and we estimate accounts for about 31% of total worker remittances," they added.

Trump's stance on bringing more jobs back to the US could affect "important business process outsourcing (BPO) sector, which caters mostly to US corporates and now brings in FX revenues that are projected to equal the size of total worker remittances (about 9% of GDP) in the next couple of years," they said.

In terms of regional security, the US functions as the largest ally for the Philippines. A lack of US military presence in the disputed waters of the South China Sea, coupled with further Chinese aggression, could leave Manila vulnerable despite the Permanent Court of Arbitration's landmark ruling.

"Taiwan could become one of his targets given the US government's long-standing concerns over Taiwan's currency practices," Nomura's Young Sun Kwon and Minoru Nogimori said.

In terms of regional security, if the US withdrew from Japan and South Korea, Taiwan could become vulnerable to North Korean and Chinese threats.

"Overall, a Trump presidency would suggest downside risks to South Korea's economy though the extent to which is at this point very hard to gauge clearly," Nomura's Minoru Nogimori and Young Sun Kwon wrote.

"We would expect Korea's fiscal burden to grow. Meanwhile, on the Korean peninsula, where tensions have again risen recently, the withdrawal of US forces would dramatically increase geopolitical risks," they added.

Trump has spoken in opposition to the Trans-Pacific Partnership, or TPP, and threatened to withdraw from North American Free Trade Agreement if key parts aren't renegotiated. Trump has also committed to push South Korea to pay for "the full cost of the security guarantees provided by the US."

Today the US maintains about 28,500 troops in South Korea.

"Hong Kong is the entrepôt for a significant amount of business between China and the US," Young Sun Kwon and Minoru Nogimori said. "Indeed, China and the US are Hong Kong's two largest export destination."

As such, they argued, Hong Kong would be vulnerable to worsening US-China relations, "not only because of its indirect exposure to China but also its weak starting position: we already forecast a recession in Hong Kong this year."

Under a Trump administration, India's economy may suffer from restrictions on legal immigration to the US.

"In 2014, India accounted for 70% of H-1B visas granted in the US and 86% of H-1B visas issued for technology firms alone," Nomura's Sonal Varma and Neha Saraf said. "Thus, an H-1B crackdown under Trump would lower the profitability of Indian IT companies (due to higher wage costs)." They said fewer US jobs for Indian citizens could therefore push India's government to "create jobs domestically and exert downward pressure on domestic skilled-worker wages."

Throughout Asia, both governments and ordinary citizens have been anxiously witnessing the bewildering rise of Trump, whose venomous rhetoric and outrageous policy pronouncements are, by all means, a major threat to American credibility. More than the rise of China, Trump — and the form of politics than he represents — is the greatest threat to American leadership in Asia.

As leading political scientists have discovered, the ascent of Trump is a symptom of a greater problem: That is to say, rising xenophobia and ‘activation’ of authoritarian tendencies among certain sections of the electorate. As an astute salesman, Trump has opportunistically tapped into an increasingly mobilized constituency, one that is inspired by outrage over economic dislocation and fear vis-à-vis “the other”, whether (Catholic) Mexicans crossing the border or (Asian) Muslims entering the United States.

Almost single-handedly, Trump has made ‘political correctness’ an ideological battle, while mainstreaming what would be normally considered as outright bigotry. Shortly after the San Bernardino attacks, the New York billionaire called for an outright ban, albeit temporarily, on entry of Muslims to the country. He tried to justify it as a reasonable precaution, but ended up totally ignoring the implication of his abhorrent proposal — that Muslims, as a whole, are potential security threats to Americans.

His statements provoked outrage in parts of Asia, where the bulk of the world’s Muslim population resides. Malaysia’s deputy home minister Nur Jazlan Mohamad lamented, “[Trump’s] proposal reflects the thinking of many people in America, and this is worrying.”

In Indonesia, the world’s largest Muslim-majority country, a top Indonesian lawmaker, Setya Novanto, was charged with breach of ethical conduct when he dared to attend one of Trump’s campaign events in New York.