Australian Financial Review

What Will President Trump Mean for US Allies?

John Lee: Trump will probably be made to walk more conventional policy lines than he is letting on

Senior Fellow
Republican presidential candidate Donald Trump at Des Moines Area Community College Newton Campus on November 19, 2015 in Newton, Iowa. (Scott Olson/Getty Images)
Republican presidential candidate Donald Trump at Des Moines Area Community College Newton Campus on November 19, 2015 in Newton, Iowa. (Scott Olson/Getty Images)

As the front-runner to secure not only the Democratic Party's nomination but also the presidency after Americans exit the voting booths in November, there has been remarkably little attention paid to Hillary Clinton. This is because of her likely Republican opponent, Donald Trump. Defying predictions by seasoned commentators that his star was destined to burn bright before burning out, "The Donald" retains a double-digit lead over GOP rivals in almost every poll that counts and has already won 12 of 18 states.

Watching the rise and rise of Trump is like political satire and drama becoming reality TV. As we watch this very consequential Republican contest, Asian capitals are beginning to give thought to what it all means for American foreign policy in the region. As the architect of the warmly welcomed pivot to Asia, a Clinton administration will present a safe pair of hands. In contrast, most believe a Trump presidency would be disastrous for friends and foes of the US. But if he wins in November, the strictures imposed by reality means Trump will probably be made to walk more conventional policy lines than he is letting on.

Cause immense anxiety

Since World War II, much of Asia has looked to the US for security and prosperity. In a region obsessed with predictability and continuity, a Trump victory in November will cause immense anxiety in the region. Articles in newspapers throughout the region have been penned against The Donald. An open letter in The Hankyoreh, a South Korean daily newspaper, in December by a former Korean soldier urged Trump to end telling "bald-faced lies". Another in Hong Kong's South China Morning Post by a Singapore-based writer in the same month urged the presidential hopeful to gain "a better understanding of how the world really works".

Should Asia be worried? One of Trump's favourite themes is ending the perceived free-riding and ensuring the US gets more out of regional allies. In 2013, he set his sights on the Korean Peninsula, asking "How long will we go on defending South Korea from North Korea without payment? When will they start to pay us?" This was no lonely thought bubble. In a CNN interview in January, he scolded the South Koreans for paying the US "peanuts" and demanded that Seoul "pay us a lot of money". Presumably, he would apply the same logic to the alliance with Japan, and possibly even Australia.

No more 'military welfare'

Trump is not alone in this line of reasoning. Many libertarians in the US are arguing against what they call "military welfare" by allies and partners, including in Asia. As the argument goes, the region has become dependent on American stewardship of the post-World War II liberal order and it is time to end the free goodies. In an environment of strained fiscal and other resources, Washington can no longer afford the indulgence of a role as the indispensable regional power. It is time for Asia to pay up.

Yet if Trump were to win office, he will be told why there is no alternative to US power. With China's growing strength, there is no effective regional balance without a fully engaged Pacific Fleet. China's announced defence budget of 954 billion yuan ($197 billion) is already three times larger than the next-largest-spending Asian power in Japan, while the budget of the People's Liberation Army constitutes almost half of all military spending in east Asia if the US is excluded.

Any significant American strategic or military withdrawal from Asia would put at severe risk open access and stability of sea lines of communication, especially if the maritime domain in east Asia becomes a Chinese lake. With two-way trade between the US and Asia worth about $US1.5 trillion ($2.01 trillion) each year, and almost all of it going and coming on ships, Trump would come to understand that the American presence in Asia is not just a matter of national ego.

Cost already shared

Besides, Trump cannot enhance American leverage over friends and foes in Asia by carrying a bigger stick and push for the gradual return of a self-help system in that region at the same time. At most he can deploy his self-proclaimed negotiation skills and gain a marginal financial advantage for his side vis-a-vis allies. Bear in mind that the cost of foreign bases in Asia is already shared, with bargaining constantly taking place between the US and host nation. For example, in a five-year agreement signed in 2014, Seoul will bear about 40 per cent of the costs of stationing US troops on its territory.

In any event, cutting the cost of supporting American troops in Asia will hardly make a dent when it comes to national fiscal repair. About 60 per cent of fiscal spending each year goes towards social services, health and aged care. Trump wants to cut taxes and improve these services at the same time, all the while railing against Obamacare. If he really wants rapid fiscal repair, he will need to raise taxes and find large cuts in domestic spending.

What about his frequent accusation that Asian trading partners are "eating our lunch" on account of the current account deficits the US has with the region? Trump has referred to China more than any other candidate in the race. When asked to elaborate in a number of debates, his emphasis is usually the same. The Donald is not "going to let them cheat".

'Knock their socks off'

"The first day in office [I am] gonna knock their socks off and they're gonna have to be fair or I'm gonna to make them pay us the whole trade deficit," Trump said. The trade deficit was $US365.7 billion in 2015.

How will he do that? In an interview with The New York Times in December, he threatened to slap a 45 per cent tariff on Chinese imports, and duties against any other Asian country who The Donald believes has artificially devalued its currency to help exporters. By the way, tariffs will also be threatened against China if it is not more helpful in arm-twisting North Korea to give up its nuclear weapons. Besides being illegal because they violate World Trade Organisation rules, economic punishments invariably have wide-ranging unintended consequences that will harm American companies and consumers, as well as other Asian trading partners. After all, east Asia is a deeply integrated production zone, meaning it becomes impossible to avoid collateral damage when imposing economic costs on one country. For example, an American icon such as the iPhone uses parts from and is assembled in up to a dozen countries throughout Asia.

US multinationals benefiting

Moreover, while Trump and other American politicians target global trade as the culprit for lost manufacturing jobs through global outsourcing, corporate US will remind every president that half of all Asian-made goods entering the US are produced by firms wholly or partially owned by multinationals based in advanced economies, with up to a third of these American multinationals. The US is one of the top three sources of foreign direct investment in every large Asian economy, including China, Japan, South Korea and south-east Asia if treated as one entity. Hardly surprising, since four-fifths of all American foreign direct investment into Asia goes towards funding export-manufacturing companies. One doubts any White House could afford to take on the collective might of Walmart, HP, Apple and others.

In any event, American consumers benefit through cheaper prices than if the product is made in the US. Try telling consumers in the US that their plasma TV or iPad is suddenly going to cost a lot more because of a trade war precipitated by their president. And even if one went ahead and imposed tariffs on say, goods made in China, American exporting firms will simply shift production to other parts of Asia such as Vietnam rather than back to the US.

Mario Cuomo, the former governor of New York, famously said that you campaign in poetry but you govern in prose. Trump, from the Big Apple, would know this saying well, even if the poetry of his campaign has been controversial and distasteful at times. In the end, and whether it is The Donald or Hillary Clinton who wins through to the White House, every commander-in-chief confronts constitutional, institutional, economic and political limits on their power.

Trump has defied all his critics to come this far. He is peddling the message to voters that he is not just the only genuine outsider but the only "Mr Fix-it" in the political race. If he goes all the way, reality will hit him. And it is only when we know how he responds to the real world and its problems that he can be judged.