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On April 20th, ESADE Alumni held the talk ''Economic outlook for 2017. A year of uncertainties: The Trump administration, Brexit and China'' by Francesc Xavier Mena, Professor of Economics at Ramon Llull University and associate professor at ESADE.
Francesc Xavier Mena began his talk by saying that he would examine the trade, energy, budgetary, monetary and regulatory policy of the Trump administration, all aimed at accomplishing Trump’s election promise of making America great again.
The imposition of immigration barriers, trade protectionism and import tariffs are, together with withdrawal from trade agreements such as TTP, TTIP and NAFTA, just some of the proposed measures that constitute U-turns on many policies implemented by previous governments.
One of Trump’s election promises was to reverse the labour situation in counties affected by the relocation of US industries as a result of NAFTA, the agreement between Canada, the United States and Mexico to create a free trade zone. His comments about ''what is consumed in the US must be made in the US'' and his threats of new tariffs on imports from Mexico have reversed the relocation of Ford and Oreo, but US industry has warned Trump that the global value chain is the basis of today’s competitiveness.
''By levying tariffs, an obsolete instrument, Trump may cause international trade to contract and GDP to fall. In addition, companies will not pay high American wages: they will robotise their plants because digitization will forge ahead, there is no other way,'' said Mena.
As regards China, Xavier Mena explained that the US debt-to-GDP ratio is already above 100% and that the largest reserves of US public debt are held by China. ''But the risk of the Chinese economy imploding is increasing dangerously and if Trump intends to unleash a trade war with China, the dollar will suffer. China has many internal imbalances and its growth will slow down. Who will then step into China’s shoes as a holder of US debt?'', wondered Mena.
As for US energy policy, the professor recalled that the US is self-sufficient in gas, thanks to shale, and heading for self-sufficiency in oil, so ''sustainability will have to carry the can.''
As regards Trump's immigration policy, the economics professor believes that it will have a negative impact on the technology sector and on many companies that depend on a talented, immigrant workforce. ''The United States is a melting pot. Silicon Valley, Hollywood, US universities, the NBA and the press are just a few of his opponents in the US. But Trump has also re-written the rules of diplomacy. What role will he play in international organizations?'' he asked.
Mena pointed out that the president's defence of an increase in interest rates by the Federal Reserve, broad-based tax cuts, and his vast infrastructure investment program are all measures that could make the US dollar appreciate in value.
This form of politics, however, is fanning the fires of populism and nationalism in European states about to hold elections.
But Mena hopes that in a few months ''the checks and balances of American democracy will redress this situation.''
Before ending his talk, the professor turned his attention to Brexit and was quite clear. ''The United Kingdom will invoke Article 50 of the Lisbon Treaty and will begin negotiations to withdraw from the European Union. The British have reaffirmed themselves as a country since the referendum, but the negotiations for their withdrawal from the EU will be protracted. The outcome will be unlike any known model and the balance is tipping towards a hard Brexit,'' he concluded.
See you there!
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