FX Outlook 2019: Surviving the Rise and Hope for a Safe Descent | Item
Challenging the American political agenda
A proper questioning of Trump’s political agenda would have paid off largely over the past two years.
A relatively quiet first year in office for Trump (2017) saw stories of a global recovery and a mild decline in the dollar. This second year of Trump’s presidency has seen Washington grapple with trade, isolated by January’s $ 1.5 billion fiscal stimulus. This put an end to notions of a synchronized global recovery and a weaker dollar.
Hats off to the US administration for the timing of its protectionist card. As (current) US Secretary of Commerce Wilbur Ross says, “Now is a good time to get aggressive on trade.”
And 2019? As always, there is a range of scenarios, but we doubt that 2019 will see any further US fiscal stimulus big enough to prevent the US economy from slowing again to trend growth close to 2%. Despite widespread recognition of the need for infrastructure spending, we doubt Democrats will want to support a stimulus that Republicans could reap the benefits of in the 2020 presidential election. In other words, the political stalemate makes more sense. likely than not that US growth will slow down.
In commercial matters, we know that the executive powers of the president are extensive. Democratic control of the House may make it more difficult to pass Trump’s NAFTA 2.0, but there is bipartisan support for a more aggressive stance against China. Democrats admit that the strategic economic dialogue established under the Obama White House has not yielded results. And while China joined the WTO on unfairly good terms, it did so under the leadership of George W. Bush in 2001.
Our baseline assumes that existing US tariffs against China remain in place until 2019 and are expanded / tightened, so that by the end of 2019 all of China’s exports to the US States will be subject to tariffs. Other scenarios are also possible. Please see our sales team’s 2019 environmental assessment on page 50.