Sri Lanka braced for uncertainty after Trump win in the US

ECONOMYNEXT – As US heads for a presidency under Donald Trump, backed by a white nationalist vote and an anti-free trade agenda Sri Lanka is braced for aftershocks from roiling international markets.

"In terms of Sri Lanka the initial impact will be how it will affect fund flows to emerging markets," Shiran Fernando, an economist at Frontier Research in Colombo said.

"We will have to see whether funds will return, like after the Brexit vote."

Prime Minister Ranil Wickremesinghe congratulated Trump saying his election represented a desire by the American people for a change.

"I see the vote as one of the ordinary people against the American establishment," Government spokesman Minister Rajitha Senaratne said.

Trump carried nakedly nationalist campaign targeting immigrants and Muslims and minorities under the guise of being anti-establishment as America limped back from a burst credit bubble in 2009.

Amid greater state intervention and tight bank regulation, sponsored mostly by left-leaning Democrats in the Congress, the US recovery was delayed creating fertile grounds for nationalist hate and scapegoating of minorities.

In the late 1920, the collapse of the German economy under socialist Weimar Republic also paved the way for National Socialism, where the blame for economic troubles was laid at the door of Jews.

Mexican immigrants and Muslims were heavily targeted in the Trump campaign.

But Trump is also for reduced regulation of business and lower taxes.  Unusual for a US President he has openly criticized the Federal Reserve. He is also expected to make it easier for petroleum firms to operated and reduce backing for state interventions aimed at blocking ‘climate change’ and boosting expensive green energy.





Trump spoke in conciliatary terms on his victory speech and called for uniting a nation that was deeply fractured during the elections.

As part of his nationalist platform, Trump has also attacked free trade and the planned Trans Pacific Partnership, which can increase the prosperity of hundreds of millions of people including those in the US.

"A lot of uncertainty in his policies over trade and foreign policy that could have pass-through impacts on Sri Lanka," notes Frontier’s Fernando.

Sri Lanka was also hoping to strike a free trade deal with America.

Anushka Wijesinha, Chief Economist at Ceylon Chamber of Commerce says a lot would depend on how far the Trump presidency goes forward in implementing election rhetoric.

A tearing off of a nuclear deal could push up oil prices, and following through on threats to restrict trade with China could damage an already fragile global trade scenario.

"There was expanding engagement with Asia by the US due it ‘pivot to Asia’ strategy," explains Wijesinha.

"It remains to be seen whether the policy would continue."

"Trump is more likely to focus more domestic affairs and it will be good for world peace if America interferes less in world affairs," Minister Senaratne said.

Though Trump has generally criticized US overseas military adventures, aggressively nationalist states that restrict trade, have provided the foundation for war in the past.

Classical liberals have long advocated free trade as a means to end wars.

In a world of free trade, classical liberals have pointed out, there is nothing left for military aggression to win that cannot be won by a capitalist business that kneels before a foreign consumer with innovative and cost effective goods and services.

Trump has singled out China for criticism, while praising Russia’s Vladimir Putin, who is also an authoritarian with aggressive tendencies. (Colombo/Nov09/2016).

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