fter Donald Trump’s surprising
upset win at the U.S. presidential
election, many countries—
if not the entire
world—are wondering what this victory
means for their own economy. Given that
Mr. Trump has quite the reputation for
being eccentric and somewhat bizarre,
many worry that he might carry out the
same eccentric and bizarre ideals in his
policies. But would he? The answer is no.
Running a country is not the same as running
a company. In a private company,
the CEO may be able to call all the shots,
but the president of the United States cannot.
First, the president must deal with the
Constitution. Second, he must persuade
Congress. Third, he still has to appease
more than half of U.S. citizens who have
not voted for him. Tens of thousands of
people have already rallied against him
all over the nation. Can he turn a blind
eye to them? Absolutely not. So among
all this uncertainty felt by the public, here
are some things we can be sure about.
First, under the Trump administration,
the Federal Open Market Committee
(FOMC) rate hike seems almost certain.
FOMC members have been deadlocked
for some time between the dovish and the
hawkish, rendering quick action almost
impossible. But this will change as Mr.
Trump is expected to fill two vacant seats
in the FOMC with the hawkish, making
them the majority. On top of that, the current
FOMC Chairwoman Janet Yellen
will be replaced by someone who will try
to pursue a rate hike. A higher rate will
benefit the people of the middle class as
they would be able to save substantially,
which in turns leads to more consumption
and consequently a more prosperous
banking industry. It will also make the
U.S. dollar stronger, giving U.S. citizens
greater purchasing power abroad, which
is good news to Korea.
Under the Trump administration, there
would also likely be huge federally
financed investments in infrastructure
across the nation. Bridges, airports, roads
and highways are expected to be renovated,
upgraded or newly built under the
new administration. These public works
will definitely raise the nation’s growth
rate. The federal budget deficit and government
bond issues may surge, but not
many will care as long as such decisions
boost US growth.
The Korean people have also been
closely following the election results, as
they are curious as to see what this means
for the Korean economy. In my opinion,
for Trump, pressuring either China or
Korea on trade and exchange rate issues
may be important but not as imminent as
the rate hike and infrastructure investment
projects in the U.S. This is because
trade talks with other countries require
lengthy and tedious negotiations before
both sides can come to an agreement.
Also, a booming U.S. economy accompanied
by a higher rate hike is one of the
best scenarios for Korea under the Trump
administration. First, Korea could expect
better export performance. As a major
part of Korea’s export performance is
affected by the growth of the U.S., a stimulation
of economic growth through
infrastructure investment would activate Korean and Chinese exports to the U.S.
Furthermore, a higher rate in the U.S. will induce the depreciation of the won exchange rate, which is also conducive to higher export performance. Of course, some challenges might arise, especially as the Japanese yen depreciated faster than any other currency after the U.S. election. This may mean that Korea’s price competitiveness against Japan’s may slightly weaken. But despite some bumps in the changing of administrations in the U.S., the Korean economy won’t be heavily affected as long as exports continue to surge.