Stocks: hoping for the best

Pakistan equities like the equities the world over were caught unawares by the Trump victory and reacted the only way stocks react to such shocks. But rallied as the shock wore off. Uncertainty would persist until of course the ambiguity that separates what Trump the candidate said and what Trump the president-elect promised is replaced by firm policy formulations. What he said during his campaigning was in short a powerful appeal to the blue-collar white and working class Americans who felt that local job opportunities for them were shrinking because of globalisation and the liberal immigration policy. True enough, globalisation had exported millions of blue-collar American jobs to foreign countries and immigrants had out-priced them in the local job market. What he promised after victory had universal appeal for the world.

As president if he tries to satisfy his voters he is likely to trigger a global trade war sparking off an international economic upheaval. He has hinted at suspending all trade and investment agreements with different countries. On the other hand if he tries to do what he has promised, he is to face a political backlash from the voters who had catapulted him to the White House. Pakistan is not likely to be affected either way, at least in the initial stages, even if Trump kicks up a global trade war as Pakistan does not have any long term trade and investment agreements with the US. America is our largest export market amounting to $3.5 billion last year.

Pakistan also enjoys the GSP package along with 129 countries. The GSP package allows the import of consumer goods not produced in the US. So, in all likelihood our trade with the US would remain unaffected unless of course dollar weakens to a considerable extent making Pakistani textile products expensive for American buyers. But then one cannot rule out the possibility of Pakistan’s economy also suffering a hit if President Trump actually tries to impose a big increase in the import duties across the board and also blocks the entry of Pakistani immigrants.

Published in The Express Tribune, November 11^th, 2016.

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