Although considered unlikely by many, the prospects of a Trump presidency in the White House is becoming less implausible. Seemingly isolationist and anti-free trade, a Trump presidency would prioritise the home front, by seeking to reduce the federal government’s $US19 trillion debt, investing in critical infrastructure and reviving the manufacturing sector. This would have real consequences for Australia and New Zealand in the areas of defence, trade and economic ties.

 

Any pullback of American power in the Asia-Pacific region would pose a landmark security risk for both countries. Australia and the US last year celebrated the 75th anniversary of diplomatic relations and have fought together in every significant conflict since World War I. But with a vacuum of American leadership in the region, this could embolden the ambitions of a confident China and volatile North Korea. The Turnbull government has vowed to increase defence spending by $30 billion over the next decade with plans to restore outlays to 2 per cent of GDP. 

 

The Turnbull and Key governments are worried about anti-free trade sentiments out of the US, and the implications for Australian and New Zealand exports within the region. Mr Trump has voiced his opposition to free trade and the 12-country Trans-Pacific Partnership (TPP), which is yet to be ratified by the US Congress. The TPP is also opposed by Democratic presidential candidates Bernie Sanders and Hillary Clinton, on the grounds that trade agreements have destroyed US manufacturing and failed to prevent currency manipulation by other nations.

 

It is important to remember that presidential candidates can pitch any policy they like on the campaign trail. But in order for these proposals to actually become law, they have to pass both houses of the US Congress, which is an unlikely feat in many cases. 

 

Regardless, with a little more than four months to go until the November presidential election, it is fair to say that both Canberra and Wellington are watching on with great interest.

 

Marc Whittaker

Portfolio Manager

Disclaimer: This is intended to provide general information only. It does not take into account your investment needs or personal circumstances and so is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to an Authorised Financial Adviser.