U.S. President Joe Biden watches as he participates in the first presidential debate of the 2024 election with former U.S. President and Republican presidential candidate Donald Trump at CNN studios in Atlanta, Georgia, on June 27, 2024.
Andrew Caballero Reynolds/AFP via Getty Images
TThe cost of Joe Biden’s dismal debate performance could be the highest for Asia, as much as $3 trillion.
That’s roughly the amount of U.S. Treasuries remaining on the balance sheets of Asia’s major central banks. Japan is the hardest hit, with $1.2 trillion, followed by China with $770 billion. With talk of a doomed reelection for President Biden, policymakers are fearing the worst about the nation’s vast assets.
Never mind the epic trade war Donald Trump A 2.0 White House would launch an offensive against a region long blamed for all of America’s problems. Going back to his days as a real estate mogul, Trump believes Asia thrives by stealing American jobs, income and wealth.
Ahead of the November 5 election, President Trump has threatened to impose a 60% tariff on all Chinese products and strip Beijing of its “most favored nation” trade status. He has threatened a 200% tax on cars. He has even spoken of replacing all US taxes with a tax on foreign goods.
Needless to say, most Asian leaders expected Biden to win the election, but the cognitively challenged June 27 debate between Biden and Trump turned the tables at the highest level.
With the polls trending against Biden, suddenly the fear of Trump sparking another huge trade clash seems the most likely scenario.
Given President Trump’s outlandish plans for a second term, the panic may be most acute among dollar-rich foreign exchange reserve managers.
Recall that as a businessman, Trump has had a history of bankruptcy dating back to at least the early 1990s. During the 2016 election campaign, Trump spooked Wall Street by threatening to default on U.S. debt.
“I would borrow money because I know if the economy crashes we can make a deal,” Trump told CNBC when asked about his fiscal plan. “And if the economy is doing well, it’s doing well. So it’s not going to hurt.”
April 2020, The Washington Post The Trump administration is trying to punish China. Debt forgiveness With US debt approaching $35 trillion, it’s easy to see how disastrous that would be.
Anyone who thinks such concerns are ridiculous hasn’t been paying attention to President Trump’s policy wish list.
The Heritage Foundation’s Project 2025 manifesto for Republicans makes the case clear: Trump would abolish the Federal Reserve, return to a gold standard currency and negate crackdowns on financial fraud.
Trump has called for an Argentine-style devaluation of the dollar to gain trade advantages, and his efforts to destabilize Asian allies that host U.S. troops, such as Japan and South Korea, during his first term will surely be a top priority in his second.
July 1, supreme court The Supreme Court has ruled that Trump and future presidents have effective immunity from liability for any action they take as an “official act,” empowering him to behave more recklessly both at home and abroad.
Biden’s blunder will make this year even more of a nightmare for Japanese Prime Minister Fumio Kishida, whose government had looked certain to end its 23-year quantitative easing program at the start of 2024.
Instead, Asia’s second-largest economy is shrinking, the yen is plummeting, China is slowing, broad-based wage increases are unlikely to spur growth and Mr. Kishida faces a real possibility of being ousted from his position in the ruling Liberal Democratic Party in September elections.
Kishida’s approval rating has fallen due to a worsening economy and a financial scandal involving a party member. Decreased to 21%Within Kishida’s party, fears of a Trump return will sound loud alarm bells.
The same goes for South Korean President Yoon Seok-yeo, who has spent considerable political capital to get closer to the Biden White House. In addition to huge losses in national bonds, South Korea’s export-dependent economy could be devastated.
Not all major Asian leaders are saddened by Trump’s suddenly improved chances of winning a second term. North Korea’s Kim Jong Un wants to meet with Trump for a few more summits, possibly in the Oval Office.
While Xi Jinping may not be happy about the coming trade war, China would welcome Trump 2.0 in another sense: Alienating close US allies and plunging Washington into chaos and dysfunction would play into Beijing’s hands.
That may be true even if Trump loses, as there is zero chance he will gracefully accept defeat and move on, and another January 6, 2021 riot would almost certainly be the result. Fitch Ratings The divisiveness of that day was cited as the reason for revoking Washington’s AAA status last year.
So with $3 trillion at stake, America’s Asian bankers may have no choice but to fasten their seatbelts and hope for the best.
