The first worry of the financial markets was what could the US Federal Reserve do? There were two counts on the Fed. A change in presidency could have brought about a change in the head of the US Fed. But that looks unlikely now. With Janet Yellen continuing to head the Fed, should interest rates normalisation begin forthwith or later; would this be gradual or faster. Anyway, these details should be part of the overall picture.

A Clinton presidency in US should by and large mean more of the same kind of scenario. This might be good in the present situation when markets have been volatile for some time. It is sure that US Federal Reserve will possibly carry on with its cautious policy and interest rates might not be jacked up just now unless there is radical change in the economic situation. That goes in favour of the emerging economies. More funds should flow into the emerging markets or at least funds should not hastily be withdrawn from these.

But for the global economy the most important take-away would possibly be the new attitude towards trade. A mood against globalisation that Donald Trump had articulated early in his campaign seems to have somewhat passed over to Clinton’s campaign. Trump had promised to clamp down on imports from China, mark the country as a currency manipulator, engaged in a trade war and close down the US markets to outside players.

This was a handle to beat Clinton with. Basically, Trump had been harping on Clinton’s earlier stance on greater globalisation and support for trade pacts. She had supported Trans-Pacific Pact and other freer trade moves. Hillary Clinton had been an avowed supporter of liberalisation of trade as a way of raising economic well-being.

Under attack from Trump she had to admit her qualified stance on trade and opening up of the American markets to imports. She tried to defend her position saying that her support for trade was in the context of what was happening at the time and not a carte blanche position. So experts feel US engagement with its major trade partners, including the European Union, would be stalled for the time being. US and EU had been talking about concluding a free trade agreement for sometime and that will not be a top priority any more.

Trump, for all his outlandish talks and accusations, had been able to drive the point that US manufacturing had gone down and employment creation had been lagging. He even questioned the fresh employment figures which were released in the foreground of last meet of Federal Reserve. He debunked those figures like so much else. However, the point seems of have sunk in. Populism wins.

This appears to be in sync with the rest of the developed world as well. With Britain deciding on exiting the EU, the latter is talking about slapping trade barriers on British goods. Depending on the kind of agreement that Britain is able to wangle, all British exports would attract tariffs which now enter the EU free of these. Despite fall in pound sterling’s exchange rate, tariffs can make British goods uncompetitive.

Incidentally, half of entire British automobile production goes to the EU and the market will get hit. Other products including financial services would face large scale withering. Indeed, this sentiment in the current wave of populism that is sweeping country after country in the advanced world would surely result in hidden protectionism. Free trade, laissez faire and all of Washington Consensus that the West had preached to the developing countries, had flown out of the window.

Third victim of Trump-Clinto9n clash could be immigration. Donald Trump had promised heavy handed check on immigration into United States. He had promised building walls across US-Mexico border and stop all entry of Muslims into the country. In sharp contrast, Hillary Clinton had at one time promoted the idea of open immigration in certain areas. She had pointed out the need for immigrant talents for the US economy. Once again, Clinton had to back-track from her earlier positions and fall in line on populism of Trump. She had to promise harder immigration control.

The changed stance will necessarily have fall-out on the rest of the world. Continuing with softer monetary policy in US would make it harder for Europe to correct its negative interest rate policy which had started hurting banks. It also would influence thinking of the Japanese central bank, which had been pumping in money incessantly.

This will leave limited room for policy manoeuvres in many countries. Take for instance China. While the Chinese economy is showing signs of stabilising, there are some real problems which are building up, according to those who are in the know of things. Experts feel that the housing sector in China is in the process of developing a bubble and that might burst any day.

An incidental impact could be on the Chinese banks which have heavy exposure to property sector. As such, the banks have amounting non-performing loans and these are beginning to weigh. Further crimping exports could create some hard economic fallout.

Whatever it is, Donald Trump will leave a large imprint on US economic policy and its impact globally even in his defeat. (IPA Service)