Never exactly bashful in his prognostications, renowned marketing professor and global thinker Jagdish Sheth has come up with some particularly bold predictions for the way President Donald Trump’s administration will reshape the global economy.
Dr. Sheth, Emory University‘s Charles H. Kellstadt chair of marketing, said there were three reasons behind Mr. Trump’s election: “economics, economics, economics,” as the power of organized labor was eroded in the wake of a global shift toward trade liberalization as a way to kickstart growth after the energy crisis of the early 1980s.
Compounded by the Great Recession of 2008-09, this led to displaced workers in a constituency that was once solidly Democratic, fueling a “white right revolt” in 2016 that catapulted Mr. Trump into the White House, he said in a video first published on globalEDGE.
Dr. Sheth, presenting his thoughts in front of a camera, believes the administration’s moves will have lasting effects for interactions with trade partners and the operations of multinationals.
As Mr. Trump focuses on bilateral trade balance as a litmus test for true partnership, the U.S. will shift away from partnerships with multinational regions like the European Union and the Asia Pacific Economic Cooperation. Countries like China, Germany, Mexico, Japan and South Korea, which have large surpluses with the U.S., will be forced into trade talks.
“I think this will all be renegotiated on a bilateral basis,” he said.
The harbinger of that change, he says, is Mr. Trump’s decision to abandon the Trans-Pacific Partnership, a 12-nation deal he derided during the campaign. The death of the TPP signals that companies will have to return to the days of having more vertically integrated manufacturing within each end market, much like European auto makers do in the United States today.
Dr. Sheth noted that today, 35 percent of global trade is intra-company trade, meaning companies shipping components among their various global units, leading to an artificial view of trade volumes between nations around the world. From Apple electronics to appliances to aircraft, he sees manufacturing moving to the markets where the products are consumed.
As a result of Brexit, he predicted stronger trade ties between the U.S. and the United Kingdom, signaling he believes bilateral trade could easily increase five-fold to $500 billion annually, even as the U.K. “decouples” from Europe and gravitates more toward former Commonwealth nations like Australia and Canada.
In U.S. ties with Asia, he foresees China bearing the brunt of U.S. criticisms of unfairness, much like Japan did in the 1980s. That will lead to more Chinese investment in the U.S.
In India, he sees a rising power that already outpaced the U.S. and China for foreign investment last year. As its defense sector rises and its middle class moves toward more “branded consumption,” more firms will set up shop in what could already be the world’s most populous nation.
“My worldview is that more an more of the rest of the world will invest in India both in manufacturing and in services,” he said.
The flipside is a particularly ominous end note: Asia is the cauldron in which the next great global conflict could boil over as traditional global alliances shift.
“It is the hotbed; if there is any major military crisis of the kind like world wars, it is more likely to happen in Asia than in other place in the the world. And once it happens, it will be out of control. It will be like starting a fire in the brittle lands of Arizona or California.”
A few weeks after Dr. Sheth’s video went live online, North Korea announced it had launched an intercontinental ballistic missile capable of reaching U.S. cities, complicating Mr. Trump’s fraught diplomatic efforts to hamper the country’s nuclear program.