Donald Trump‘s first 200 days: here’s what could happen

US President Donald Trump pumps his fist after addressing the crowd. Picture: AFP

As Australians we can only hope that our politicians stop pretending Donald Trump is a bad dream. He is now the 45th president of the largest country on earth. And he told Australians how we must deal with his new administration: “From this day forward it is going to be America First”. Every decision on trade, taxes immigration and foreign affairs will be made to benefit American workers and American families. “Protection will lead to great prosperity and strength”. Earlier he said that the wealth of the middle class had been “ripped from their homes and redistributed across the world”. .

Once the world’s largest country embarks on a protectionist course then globalisation, as we once knew it is dead. The Chinese and Japanese who bought our iron ore, gas and coal and used it to make products to sell to the US will have to adopt new strategies to gain long term access to the US market and create jobs for their own people. .

Mexico, Canada and the countries currently calling themselves Europe will have to do the same thing. And so will Australia.

Donald Trump inauguration

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And as countries do that almost certainly they will embrace some of the philosophies of the US. This means a very different approach to business and to the business of government.

But before I detail some of what will be required I want to talk about what has caused the US to change strategy and the timing of the looming revolution.

At the start of his address Trump used these words. “We are transferring power from Washington DC and giving it back to you the people … for too long a small group in our nation’s capital has reaped the rewards of government while the people have born the cost”.

Canberra modelled itself on Washington so that’s exactly what Canberra has been doing and continues to do (my apologies to the wonderful men and women of our national capital who are not in that elite group of politicians, public servants and those in the media who push their agenda).

I suggest our Canberra swamp is far worse than that of Washington. Our top public servants lined their pockets via blatant rorts in the old public service pension scheme. Too many politicians copied them. At the same time the Canberra elite were advocating destruction of our industries and private sector employment. While that is unfair it is the way it looks to vast areas of Australia---the political elite never understood that the benefits of globalisation were not uniformly spread around. In the US the people revolted. But what happened in Canberra and Washington was duplicated around the world. If President Trump can find a way to drain the Washington swamp and not replace it with a worse swamp then it will inspire people not just in Australia but also in the countries of Europe to do likewise. Brussels is worse than either Canberra or Washington.

We then get to the timing of these developments. The proposed dramatic rise in US infrastructure spending will take time to engineer but will drive America in the final years of the Trump administration. But the migration, taxes and trade revolution will happen faster than most forecasters predict. For Trump it starts on January 20, 2017. Trump has built around him a remarkable team and they are dedicated to his vision and they we not there to muck around like our politicians.

So here is what I think will happen in the first 200 days of Trump.

• He will put overseas suppliers on notice that tariffs on key industrial goods are going to rise and rise steeply. So start building plants in the US or face the consequences. And because the technology has changed these new plants will not be labour intensive and the US will build the most efficient and modern industrial base on earth. The jobs will be created around that base not simply in the base. The revolution will need a lot of commodities. Energy investment will be enormous.

• To finance its industrial revolution Trump will lower US taxes both corporate and personal so encouraging Americans to bring their money back home. My guess is that there will be an amnesty for past sins.

• He will tell Germany, France, the UK and Italy that they will have to bare a much greater share of the cost of NATO. Germany and France will need to decide what they really need to defend. Is it remote indefensible places on the Baltic Sea? The Brussels swamp may be drained and the French will put France first and the Germans Germany first etc. Whichever way it goes Europe is going to be fundamentally changed.

But Trump will give the same message to Japan and possibly Australia although we currently spend heavily but hose too much of our equipment expenditure up against the wall. We desperately need a defence industrial base.

• The influx of money from around the world will lift the US dollar. The era of very low global interest rates is over.

• There will be a rise in US inflation because of the avalanche of investment but the higher US dollar, the new technologies and the fact that Trump is planning the most efficient flexible and well-rewarded work force on earth will curb inflation. Trump plans to let independent contractors enjoy the same rates as companies. . He will attract the best talent from around the world, which in will multiply the job creation. This is all about bringing benefits to the people.

What should our strategy be? First I would pick, say, five the policies that a Donald Trump might introduce to Australia.

But we need to start to think about exporting iron ore to the US or certainly helping some of our customers in China and Japan tailor their operations so final processing was in the US ---in other words US trade must be sold so it is in the best interests of the US.

We will need to be ready to show Trump’s people that our US free trade agreement is in their interests.

And finally and most importantly longer term the era of low interest rates is over. We have camouflaged our deeper problems by leveraging our population to buy houses. Higher interest rates will make those people require better paying jobs and force the political elite to start thinking about the people.

But the good news is that the Trump revolution will take time so we can adjust.