Trump victory could mark slide into isolation, damaging export hopes
New Zealand's interests could be damaged as the rise of Donald Trump marks a major swing against international trade.
Financial markets are braced for turbulence this week, amid growing fears that the unpredictable Republican nominee could win the United States Presidential election on Tuesday.
Trump, a celebrity businessman with virtually no political experience, has promised to tear up trade agreements which do not benefit US interests such as the Trans-Pacific Partnership Agreement, as well as imposing punitive tariffs on Mexico and China.
Although most observers expect Trump would ultimately be unwilling or unable to implement his policy pledges, one trade negotiator warned his statements had to be taken seriously, with little sign the former outsider would moderate his positions.
Kirk Hope, chief executive of Business New Zealand, said the immediate impact of a Trump victory was likely to be a drop in the US dollar, and potentially higher borrowing costs.
While in isolation these were likely to be manageable, Hope said coupled with the Brexit vote, and a wider rise in anti trade feeling could hurt export led countries like New Zealand, as the political mood moved against globalisation.
"There are broader implications for international financial markets which create much more challenging trading conditions than we have seen for a long time."
Any steps by Trump to impose new tariffs on the US' key trading partners "could well lead to tariff retaliation and a general increase in protectionism which would not in any way, shape or form benefit New Zealand".
While many political commentators have played down the risks of Trump being able to implement his plans, former diplomat Charles Finny, who led New Zealand's trade negotiations with China and Taiwan, said there was no sign of Trump moving to the centre, as usually happened as elections drew closer.
"[Trump's rhetoric] should be taken seriously because it could all be implemented.
"We've all been assuming that Trump was a joke candidate. Okay, he got the nomination, but we thought Clinton would beat him by a mile. Well, it's not looking like that now," Finny said.
"We all assumed he would moderate his position, and he hasn't. This is something new."
Trump's promises on trade would represent a "total breach" of the US' World Trade Organisation pledges, leading to substantial disputes.
A disdain for agreements which did not suit US interests suggested the world's largest economy could enter a period of isolationism, Finny said.
"We're looking, globally, incredibly like the late 1920s and 1930s," Finny said, pointing to a period where attempts to create international trade agreements were "blown apart" by major countries wanting to protect their own interests, with disastrous results.
"Essentially we entered an era of dictators. What about now? We've got [Vladimir] Putin [in Russia]. We've got the Chinese president taking more power and we've got a Trump-like candidate in the United States.
"It fills me with real trepidation."
Cameron Bagrie, ANZ's New Zealand chief economists, has dismissed fears that a Trump victory could mark "armageddon" in financial markets.
However Bagrie said there appeared to be a global shift towards populism which, were it to gain momentum, would damage the outlook for trade, a risk which global financial markets appeared to be overlooking.
"I struggle to see why markets are this lofty, optimistic, about the next 10 years," Bagrie said.
"If I have a look at what we see in the political arena, not just in America but in a host of destinations around the globe, we are very clearly seeing an anti-globalisation thematic that is coming to the fore."