The Malta Independent 20 February 2019, Wednesday

The world economy after Brexit and in the Trump era

Thursday, 17 November 2016, 09:32 Last update: about 3 years ago

These are still, obviously, early days to see what will happen to the world's economy after Brexit and during the Trump presidency. It is clear, however, that there will be major impacts considering that the economic direction was an integral part of the two campaigns.

In Britain, as a consequence of Brexit, there was not the catastrophe predicted by the Remain camp and by David Cameron. On the contrary, although the pound weakened, there was a spurt in exports and a huge increase in jobs since June.

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But these are early days. One still has to see how Brexit will work out, whether it will be a hard Brexit or a soft Brexit and whether the UK will remain in the single market or move completely outside it, whether the UK will succeed in signing advantageous trade deals etc.

Ultimately, however, what will be the determining factor will depend on the ability of the British people and enterprises to increase productivity (which is rather low) and to create products that will once again refresh the British name in manufacturing.

There is the curious case of Nissan which has reached a separate (and secret) agreement with Theresa May to ensure the continuation of its presence in Britain.

The future of the British economy will also depend on whether Britain will retain the many EU nationals working in Britain now or whether these will relocate elsewhere, together with their companies.

The American presidential election was determined to a great part by the criticism by Donald Trump of the US economic system and its impact on millions of workers. It has already been noted that Trump succeeded in harnessing the votes of the workers, mostly white, but also black, where these used to be the power base of the Democrat Party.

In essence, Trump put into words the anger felt by these workers who feel they have been neglected by successive presidents and governments in favour of trade deals with other countries which only succeeded, Trump contended, in transferring jobs outside the US and in leaving entire areas to fall into neglect.

It is no coincidence that the so-called swing states, who had this kind of manufacturing in disarray, swung heavily to Trump on election day. They had previously been Democrat from the Great Deal times.

So far, so good. The workers' anger got Trump to the White House.

After 20 January, when he becomes the 45th President of the United States, Trump will be called upon to implement his election promises. He has already watered down his election promise to do away with Obama Care.

He has promised a hefty tax cut, infrastructural works and to redesign such trade deals (especially the one with China) that in his opinion militate against American interest.

The United States is still considered as the biggest economy in the world (though China says it is bigger) and what happens in the US will have an impact on the rest of the world. A US that succumbs to protectionism may be bad news to the rest of the world. And a US that kicks out millions of illegal immigrants may actually become poorer.

All this is, obviously, still to be seen. 
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