Home Blogs Asian Chemical Connections Donald Trump: Three Scenarios For The Chemicals Industry

Donald Trump: Three Scenarios For The Chemicals Industry

Business, China, Company Strategy, Economics, US
By John Richardson on 10-Nov-2016


By John Richardson

SO much for the pollsters, then, just like Brexit. His victory, like Brexit, is the result of the end of the Economic Supercylce. Hundreds of millions of blue-collar,  or working class, and middle class people are mightily angry with the political elites because of diminished economic opportunities.

The long-term implications we will have to think through over the coming months. Right now, though the chemicals industry is in the midst of its budget-planning process for 2017. Would should be your three immediate scenarios be for next year?

  1. Mr Trump’s appeal for unity during his acceptance speech, leads to  a period of compromise and calm reflection, Oil, other commodity and financial markets bounce around a bit, but in general there are no major shocks to these important barometers of the wider economy. Therefore, it is business as usual in the wider economy. But of course business as usual means that all the demographics-driven long-term difficulties that confront the West will still need to be addressed.
  2. International trade tensions build, particularly with China which is caught in a bind. Its currency weakens a little as economic reforms accelerate and the real-estate bubble is deflated. This is seen to a limited degree as a deliberate attempt to manipulate the Yuan downwards to gain more competitive advantage in export markets. Words are not followed-up by actions, however. The political mood slightly dents global economic confidence, with a resulting mild sell-off in equities and commodities. Oil price fall a little and so does chemicals pricing and chemicals demand.
  3. My base case for 2017, which I very much hope is wrong, is a global trade war. Chemicals trade breaks down as wave after wave of protectionist measures are introduced. The global economy enters recession and oil prices, chemicals prices and chemicals demand suffer major declines.

Be prepared and plan, with always at the back of your mind the chart above on the  end of the Economic Supercycle. Unless or until these challenges are addressed, we will continue to live in incredibly volatile social, political and economic times.