Republican presidential nominee Donald Trump speaks during a campaign rally on Oct. 31 in Henderson, Nevada. © AP
William Pesek
Everything officials from Tokyo to Jakarta thought they knew about how Asia’s 2025 would turn out was upended in an instant by Donald Trump’s return to the White House.
A Trump 2.0 presidency had been a distant risk all along, a specter that haunts like background music. Yet the stark reality of four more years of Trumpian chaos surprised Asian markets nonetheless.
The “Trump shock” sent the dollar skyward and anxieties ever higher — and at arguably the very worst moment for the region’s economies.
Even if Kamala Harris had pulled off an electoral victory on Tuesday, Japan, South Korea and the rest of Asia would still be grappling with China’s slowdown. Accompanying China’s downshift are deflationary forces that, in the words of Fitch Ratings analyst Alex Muscatelli, “could become entrenched” if “current trends in the domestic economy are exacerbated.”
Those current trends include a deepening property crisis of a magnitude that echoes Japan’s 1990s bad-loan crisis. The fallout from that debacle is still with Tokyo, as evidenced by stagnant wages and the Bank of Japan struggling to get short-term rates above 0.25%.
Japan also has been has been beset by doubts as to whether Prime Minister Shigeru Ishiba has the wherewithal to keep his job — with his Liberal Democratic Party clinging to power after losing its majority in last month’s lower house election.
Seoul, meanwhile, has been struggling with sluggish growth, tepid income gains, near-record youth unemployment and a stubborn “Korea discount” keeping stocks undervalued.
South Korea — sandwiched between highly-developed Japan and lower-cost developing Asian economies — is struggling to find its groove. A 19% approval rating makes it hard for President Yoon Suk Yeol to get vital reforms done.
The region has other worries: a housing bubble in Taiwan, slowing growth in Indonesia, artificial intelligence’s rising threat to the Philippines’ vital call center sector, political squabbling in Thailand and a cost-of-living crisis in Singapore.
Trump meets former Japanese Prime Minister Taro Aso at Trump Tower in New York on April 23. © APYet Trump’s return poses supersized threats to Asia for four reasons.
One: Trump has laid out a tariff-heavy plan to “Make America Great Again.” For starters, UBS economists say his proposed 60% tax on all Chinese goods will more than halve China’s annual growth rate. That’s a big deal because China is the globe’s top trading nation.
On the tariff front, that’s only the beginning. Trump has telegraphed across-the-board blanket levies on every country. And how long do CEOs at Toyota and Hyundai think it will be before Trump extends the 100% tariffs he floated on Mexican-made cars to Japan and South Korea?
Two: Trump has no real economic agenda beyond clawing back jobs from Asia. Sure, he and his Republican majority in the Senate might try to cut taxes again. With the national debt surging toward $36 trillion, though, that might be easier said than done.
Expect Trump to turn anew to plans to weaken the dollar for trade advantage. Part of that dynamic — and a dangerous one at that — is Trump’s threats to rein in the Federal Reserve’s independence. That could imperil trust in the dollar.
Three: Trump clearly views his election win as a big mandate to do his worst at home and abroad. That could translate into even more cataclysmic trade war efforts. Trump, a serial bankruptcy filer in his business mogul days, has mulled defaulting on U.S. debt, Argentina-style, to punish trade rivals.
Tokyo and Seoul would likely see Trump renew efforts to demand protection payments, literally. During his 2017-2021 presidency, Trump tried to extort Japan for $8 billion a year to continue hosting U.S. troops. He recently said South Korea should pay $10 billion annually for the honor.
Four: geopolitically, a Trump 2.0 White House with no guardrails — and intense MAGA backing — could upend Europe, Asia and the Middle East in game-changing ways. Trump would almost certainly give Vladimir Putin latitude to finish the job in Ukraine.
The signal that might send to Taiwan would be unmistakable. Few foreign policy experts think Trump would come to Taipei’s defense if Chinese President Xi Jinping moved against the island of 23 million people.
Odds are Trump would free Israeli Prime Minister Benjamin Netanyahu from U.S. constraints on the war in Gaza. Trump would very likely increase sanctions on Iran — and perhaps even threaten war — adding fresh upward pressure to oil prices.
There is another wildcard for which Ishiba, Yoon and other Asian leaders must brace: that Asia might get a more transactional Trump this time. Might he, for example, go the other way versus China and pursue a “grand design” bilateral trade deal?
It has long been a fear of officials in Tokyo, Seoul and elsewhere in Asia that Trump might seek a Group of Two pact on goods and services. That might leave Japan and Korea looking in from the outside, struggling to maintain market share.
Most concerning, the relentless uncertainty likely to peak in 2025 could make the 2008 Lehman shock seem mild by comparison. This is in no one’s best interest — least of all Asian nations already grappling with structural challenges.
source : asia.nikkei