Trump is the biggest threat

Not much help: Despite his use of tariffs to help skew the playing field in favour of US firms, the very industries Trump has tried to help have become the weakest links in the otherwise solid economy.

WASHINGTON: At rallies and whistle-stop campaign tours, President Donald Trump proclaims a renaissance in US factories rebuilding the nation with “American steel”, “American heart” and “American hands”.

But in reality, despite his relentless use of punitive tariffs to help skew the playing field in favour of US companies, the very industries he has tried to help have become the weakest links in the otherwise solid economy.

With just over a year to go before he faces re-election, Trump takes credit for the most vigorous economy in the industrialised world, with the expansion entering its 11th year and historically low unemployment.

But while services and office jobs dominate the US economy, Trump continues to promote the factory and mining jobs that were the lifeblood of the economy in the last century.

“American steel mills are roaring back to life,” he declared last month in Florida – the same day US Steel announced it would idle plants in Michigan and Indiana until “market conditions improve”.

And to West Virginians he said, “The coal industry is back.”

But in fact each of the sectors Trump has championed – coal mining, steel, aluminium and auto manufacturing – have been buffeted by a combination of market forces and changing technologies – factors beyond his control – or damaged by the very things he did to protect them, economists and analysts say.

Last month, a national survey of manufacturing activity hit its lowest level in nearly three years – narrowly avoiding slipping into contraction – while regional surveys have also seen record declines.

In March, the number of workers in US manufacturing shrank for the first time in nearly two years and it is now growing more slowly than the rest of the American workforce.

Trump has imposed tariffs on hundreds of billions in imports, renegotiated trade agreements and dangled the threat of worse over China and Europe and Mexico – all while publicly browbeating companies that close US factories or move production offshore.

But weak foreign demand, a strong US dollar and a decades-long evolution away from domestic manufacturing have progressively shrunk America’s industrial sector, said Gregory Daco, chief US economist at Oxford Economics.

Trump’s world trade war has not helped either.

“The policies that have been implemented in terms of protectionism have hurt the very sectors they were meant to protect. There’s no escaping that,” Daco said. - AFP/The Star

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China marks 40th anniversary of reform and opening-up with greater resolve to cope with ‘unimaginable’ perils

Chinese President Xi Jinping ahead of his speech at the Great Hall of the People in Beijing to mark the 40th anniversary of China's reform and opening up. Photo: Reuters

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• Chinese president avoids specifics for the road ahead 

• Audiences at home and abroad need convincing that reforms started 40 years ago will continue 

China faces “unimaginable” perils and dangers ahead and must rely on Communist Party rule and economic reform to sail through them, Chinese President Xi Jinping said in one of the most watched speeches of his leadership in Beijing on Tuesday.

Speaking at the Great Hall of the People to mark the 40th anniversary of the country’s reform and opening up, Xi did not directly address the specific challenges facing the world’s second biggest economy or touch on sensitive issues such as the ongoing trade war with the US.

Instead, Xi spent much of the hour-and-a-half speech drawing general conclusions about China’s economic and social development in the past four decades since Deng Xiaoping, China’s former paramount leader, started to embrace market-oriented changes in China.

The No 1 lesson China can draw from the 40 years of success is that the country must stick to the leadership of the Communist Party, Xi said.

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“The practices of reform and opening up in the past 40 years have shown us that the Chinese Communist Party leadership is the fundamental character of socialism with Chinese characteristics … east, west, south, north, and the middle, the party leads everything,” he said.

“Every step in reform and opening up will not be easy, and we will face all kinds of risks and challenges in the future and we may even encounter unimaginable terrifying tidal waves and horrifying storms,” Xi said.

“Only by improving the party's leadership and governance … can we ensure the ship of reform and opening up will sail forward.”

Xi’s speech was delivered as prospects for China’s growth are clouded abroad, by rising rivalries between China and the US, and by a deepening economic slowdown at home.

Xi, who is now legally entitled to retain his presidency beyond 2023 after a constitutional amendment in March this year, needs to convince domestic and foreign audiences that Beijing remains committed to the economic liberalisation process that was started by Deng 40 years ago.

The stock indexes of Shanghai and Shenzhen, which had both risen in early trading in anticipation of possible policy announcements, retraced their declines soon after proceedings began.

Shanghai’s composite index fell as much as 1.2 per cent, while Shenzhen’s index fell as much as 1.5 per cent to an eight-week low.

On the Hong Kong exchange, the Hang Seng Index fell 0.9 per cent while the H-share index declined 1.3 per cent.

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Xi stressed that China would stick to its own chosen path, namely socialism with Chinese characteristics.

“To push forward reform and opening up in a country with 5,000 years of civilisation and a population of 1.3 billion, there are no textbooks containing golden rules or teachers who can be arrogant to the Chinese people,” he said.

Xi quoted the renowned Chinese author Lu Xun, who asked, “what's a road? A trodden path in a place where there was previously no road, and a passage opened from a place where there were only thorns.”

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Xi opened his speech by saying the Cultural Revolution, from 1966 to 1976, had brought China's economy to the brink of collapse and went on to quote Deng, saying “China's modernisation and socialism will be buried if we do not embrace reform and opening up now.”

The audience at the Great Hall of the People listen to Chinese President Xi Jinping’s speech commemorating 40 years of opening up and reform. Photo: Xinhua

He made it clear that Beijing would not abandon its road as China's developmental achievements in the past four decades had proven the “vivid vitality” of China's “scientific socialism”.

“For those that ought to be changed or can be changed, we will change; but for those that shouldn't be changed or cannot be changed, we will firmly not change,” Xi said.

In international relations, Xi reiterated Beijing’s existing line that China would not seek hegemony, but he did not mention the US specifically.

Xi said China was walking closer to the world’s centre stage and was now “an internationally recognised” builder of world peace, a contributor to global development, and a keeper of international order.

China, he said, had contributed “China wisdom, China solutions and China power” to world peace and development.

The Chinese president said China would play its role as “a big responsible country” to support developing countries and to take part in global governance.

“China will never grow at the cost of other countries' interests but will never give up its legitimate rights and interests … China's development does not pose a threat to any other country. No matter how far China develops, it will never seek hegemony,” Xi said.

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In a long list of China's economic and social achievements of the past four decades, Xi said China had achieved an annual average growth in GDP of 9.5 per cent since 1978, and contributed more than 30 per cent towards total global economic growth for many years.

China, he said, was now the world's second largest economy, the world's biggest manufacturing country and the world's No 1 commodity trading country.

From left: Chinese President Xi Jinping and Premier Li Keqiang at the 40th anniversary commemorations of reform on Thursday. Photo: AP

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In terms of ideology, Xi said China would stick to its official ideology, namely Marxism, Leninism, Mao Thought, Deng Xiaoping Theory, Three Represents theory, scientific development concept and his own “Theory of Socialism with Chinese Characteristics in the New Era”.

In terms of economic policies, Xi reiterated the policy that China would support public ownership while offering “unswerving” support to non-state sectors.

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The world at a T-junction

Jan 20, 2017, marked the inauguration of the 45th President of the United States, Donald J Trump. Next week, the Lunar Year of the Monkey ends, ushering in the Year of the Rooster. This is where monkey business ends and the chickens come home to roost.

Trump’s election marks a watershed between the old liberal order and a new populist phase that is clearly a rejection of the old order. Former German Foreign Minister Joschka Fischer defined this change as “Goodbye to the West” – a concept that the US was committed to the defence of its allies, mostly Western Europe, Australia and Japan.

Trump has turned the old establishment on its head. Policy is not made by consensus, but by tweets. World thought leader Mohamed El-Erian, whom I had the great fortune to moderate at his keynote address to the Asian Financial Forum in Hong Kong earlier this week, argued that the world is at a T-junction.

The old order has come to a dead-end. It is not even at the cross-roads, where you have the option of moving forward. At a T-junction, you either move right or move left. Volatility and the range of possibilities have increased, because no one knows which policy and which rule will change with the next tweet.

There is, of course, no difficulty in picking where Trump will move. Indeed, anyone who said Trump is unpredictable is wrong – he is very predictable.

He will do whatever is in his best interest, saying that it is in America’s interest. He will move right, because the populist sentiment has rejected the old leftist liberal order. Our only concern is – how far right will he go? Based upon the inclinations of his appointees so far, it looks pretty far right.

Trump’s election marks a very important juncture in Pax Americana. Two Democratic presidents marked the rise of the present American Exceptionalism – Franklin D Roosevelt (1933-1945) and John F Kennedy (1961-1963). The first brought in the New Deal to get America out of the Great Recession and then won the Second World War, confirming the new American order. The second inaugurated a more inclusive America, ushering global idealism of the American dream, providing aid, trade and culturally, an Age of Camelot.

New deal

Trump’s ascension signals the end of the rule-based era for the public good, with a new era of clear and present self-interest, changing allies and allegiances by the tweet. Allies and foes alike do not know how to react to this new Art of the Deal.

Crossing the river by feeling the stones is possible, when there are still some stones. But crossing the swamp where waters are murky with crocodiles and leeches will be much more complicated.

I was forced to dust off my copy of German historian Oscar Spengler’s Decline of the West, written between 1911 and 1922, to get a sense of how we should think about this era from a long-term historical perspective. Vastly simplifying his magnum opus, Spengler’s thesis is that when parlimentarian politics fail, history tends to replace disorder with great men like Julius Caesar or Napoleon.

Of course, one has to recognise that troubled times do not always get great statesmen, but may get little despots and decadent failures like Caligula or Nero, who eventually bankrupted Rome.

A significant minority of Americans voted for Trump because he argued that he could make America great again. But the irony is not that America is weak, but that America is strong and on the verge of achieving the strongest recovery among the advanced economies.

The perceived weakness comes from the insecurity of a significant majority of the working class that has become disadvantaged, not by globalisation, but by the benign neglect of the Washington/Wall Street elite who favoured themselves at the expense of the working class.

Globalisation has not failed. It is the high priests of globalisation trying to deflect the populist anger against anyone but themselves that created Trump. The same high priests are joining the Trump camp, cheering the markets for the greater suckers.

What are Asians going to do in this Trumpian Reality Show?

First, we need to distinguish the signal from the noise.

All the breast-beating at the Davos World Economic Forum this week was about how the caviar-champagne-forecasters got it all wrong. They were simply too self-congratulatory, self-referential and self-satisfied. They did not do the reality checks of simply looking at what was truly happening – the anger of the masses.

Second, despite the fact that the dollar is strong and will remain strong if Trump gets his economic policies right, the US is still funded by global savings – mostly from Asia. Asia remains the world’s largest and fastest growing region with the highest savings. What we need to do is to channel that savings to Asian markets, even as the US and European banks retreat home.

Third, the Trans-Pacific Partnership (TPP) was always an empty promise because going forward, technology and moving manufacturing jobs back to the US will not create greater exports for US trading partners.

The Asian global supply chain is changing very fast from all points-to-one market (US) to point-to-point; South-to-South, because with more than half of world population and a growing middle class, the potential for global trade, investment and financial expansion is still in trade between India, China, Indonesia and all the emerging markets of the world.

If the US turns inward under Trump, then Asians need to heed Franklin Roosevelt’s wake-up call at his inauguration, “the only thing we have to fear is fear itself”.

Under Trump, we have much to fear, but remember, it’s “his dollar, but our savings”. The US Bureau of Economic Analysis data showed that the US had net foreign liabilities of US$7.8 trillion or 41.8% of GDP at the end of the third quarter 2016. In the Year of the Rooster, this is not chicken-feed.

As America moves to a new T-(for Trump) junction, the choice is not between left or right, but between a Great America or a small-minded America.

Time for Asians to think and act for themselves.

By Andrew Sheng

Tan Sri Andrew Sheng writes on global issues from an Asian perspective.


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