President Trump’s 3 executive actions
On Monday, 23 January, the new U.S. President Donald Trump signed 3 executive actions:
- Withdrawal of the U.S. from the Trans-Pacific Partnership (TPP)
- A hiring freeze on all Federal agencies, except for the military
- Reinstated the Mexico City abortion rules. This includes a ban on any international non-governmental organizations from receiving U.S. government funding of any kind if they perform or promote abortion services
TPP withdrawal crucial to global markets
The decision regarding withdrawal from the 12-member Trans-Pacific trade deal (signed in 2015) is set to impact global markets and investors the most. The deal, although signed by former U.S. President Barack Obama, was never ratified by the U.S. Congress. However, considering that the signatories to the TPP together represent 40% of world GDP and about one-third of world trade, the decision is big news for markets even outside of the TPP. Signatories to the TPP included Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S., and Vietnam.
These emerging markets may pay the price
As he signed the document, Donald Trump referred to the withdrawal as a “great thing for the American worker.” With this, we see Trump’s protectionist pledges from his election campaign turning into action. According to Trump, the Trans-Pacific Partnership equated to more harm than benefit for the American worker. As Trump sees it, it has cost American workers their jobs. The free trade liberty provided by the TPP has led to businesses investing in operations beyond the US, in search of lower costs of manufacturing. This has, in effect, exported jobs which would have otherwise benefitted the American worker had these establishments set up in the US (SPY) (IWM) (QQQ).
The decision sent shockwaves through Mexico and major emerging (EEM) (VWO) Asian nations which had their economic hopes pinned to the deal. TPP member countries such as Mexico (EWW), Vietnam (VNM), and Malaysia (EWM) could have been the major beneficiaries as low-cost manufacturing hubs of this set-up. With the US exiting the TPP, we may see trade and investments between these nations and the US (SPY), being affected. These three emerging markets could have to pay the biggest price for Trump’s TPP termination.