The Potential Consequences of a Trump Presidency for Turkey
The week before, I wrote about the emerging admiration for Donald Trump in Silicon Valley. Recently, I have observed a similar interest in Trump, especially among business and some political circles in Turkey. Silicon Valley’s Democratic guru Reid Hoffman was telling Trump supporters, “Don’t think short-term; in the long run, Trump will harm all of us!” So, what would the impact be on Turkey if Trump were elected president? Let’s discuss.
Trump’s most significant trait is doing whatever comes to his mind. He doesn’t work with institutions but with a small circle of people who are loyal to him. A natural consequence of this is unpredictability. When evaluating my predictions below, it’s essential to remember that I made them based on Trump’s previous behaviors and statements, but the implementation could be different. Of course, for a country like Turkey, located in a region where unpredictability is a fundamental parameter, adding a new unpredictability factor to the existing variables hurts its own. We should also keep this in mind.
On the economic front, there are concerns that the policies pursued by the Trump administration could reignite inflation locally and globally. First, Trump said he would reduce taxes. If he does this without reducing public spending, the deterioration in the public balance will trigger inflation. Second, Trump says, “I’ll grab the illegal immigrants in the U.S. by the ear and send them back to their home countries.” How successful he will be in this is uncertain. However, even the panic caused by this policy alone could make it even harder to find workers in jobs that are already difficult to fill, particularly in the service sector, pushing wages upward. Third, the protectionist policies that Trump has consistently advocated, with new tariffs, could increase production costs in the U.S. and fuel inflation. If inflation rises in the U.S., global costs in dollar terms will also rise. This will negatively affect our fight against inflation starting in 2025.
Trump had withdrawn from the Paris Climate Agreement during his previous presidency. Similar steps are expected from him again on this issue. But what will happen to the Biden administration’s industrial policies targeting climate technologies? Trump will likely continue them, albeit with a different focus or format. Would Trump’s disruption of the slowly progressing positive global momentum on climate change, delaying green transformation processes, benefit us? Given that the EU still appears to continue its carbon border tax policy and that the EU is our primary export market, probably not. Regarding bilateral trade, let’s not forget that the tariffs Trump imposed on a whim in the past have hurt our heavy industry sectors like steel.
On the other hand, if Trumo comes to power, he will prioritize shifting production out of China. Joe Biden had said, “Let the supply chains move out of China, whether they come to us or friendly countries” (friend-shoring). However, Trump will likely push for it to return to the U.S. (re-shoring), which is a net negative for us.
Now, let’s move on to the potential developments in the regulatory area. One of the most significant changes under the Biden administration was waking up antitrust laws in the U.S. after twenty years of dormancy. The crackdown on digital giants like Google and Facebook is positive for mid-sized, developing markets like Turkey because we are a country that follows rather than sets rules in the digital world. Although these monopolies exploit both Americans and us, — let’s admit it — the power to say “stop” lies with the Americans! You might ask, “What happened after Biden went after these companies?” Not much because legal processes take time. It’s rumored that the new Democratic presidential candidate, Kamala Harris, also from California, has good relations with Silicon Valley companies. So, whoever gets elected, the spring of antitrust law in the U.S. may end before it even begins. This is not positive for us.
Frankly, the Trump presidency’s most concrete positive impact on Turkey’s economy could be forcing the Fed into an early rate cut, inadvertently accelerating capital flows to emerging markets. However, the power of U.S. presidents over the Fed is also limited.
In foreign policy, Trump’s main characteristic is unilateral action. He does not usually work in alliances, seeing this as a weakness. This means that, while unconditionally supporting Israel, reducing U.S. presence in the Middle East, or a potential scenario of an attack on Iran, he might act on a whim. It’s true that Biden also supports Israel, but in the U.S., the prominent supporters of the Israeli lobby are not the Jews but Evangelical Christians, who form Trump’s core base. Therefore, unilateral actions on sensitive issues are likely to cause us trouble. Figures like Mike Pompeo, who served as CIA Director and Secretary of State under Trump, believe that Trump would escalate the war in Ukraine and bring Putin to his knees. At the same time, some believe Trump would leave Ukraine and Europe alone. A U.S. that leads NATO and forces Europeans to pull their weight would be good for us. But how capable is Trump of doing this?
Trump is likely a good president for the average American. For the average Turk, however, he is not. But it’s the Americans who elect the U.S. president. The race in the U.S. has just begun. What we need to do is follow the race and adapt accordingly.
This article is a translated version of “Trump iktidarının Türkiye için muhtemel sonuçları” which was initially published in Economic Daily (Nasıl Bir Ekonomi Gazetesi) on August 2, 2024.
