Focus of new US president at national economy will be certainly beneficial for it. Economic growth, in turn, will inevitably increase the investment attractiveness of the United States. However, if somewhere investments increase, then otherwhere (or rather in the rest of the world) they should decrease.
With Trump’s coming at the White House, many world countries began to prepare for a serious economic defense.
First of all, it comes to defense in trade. Trump promised to restore America’s lost position of industrial power. To do this, he is ready to go increasing import tariffs and taking other protectionist measures. Naturally, other countries will have to strike back in kind.
Second, defense will be needed in the field of investments. Trump threatened to raise the key interest rate of the US Federal Reserve and at the same time reduce tax rates in real economy.
America can become an “investment magnet” that will attract capitals from around the world. And it endangers the world with serious economic implications.
Already in 2015 when the US Federal Reserve announced its plans to increase the key rate, a reversal of capital flows towards America was visible. According to the Institute of International Finance, in 2015 the outflow of capital from emerging markets was $ 730 billion, of which overwhelming part ($ 680 bln) came from China.
It is fair to note that the world did not live long in a state of euphoria from economic and financial liberalism. The first alarm was financial crisis in Southeast Asia in 1997-1998. Financial speculators then crashed national currencies of many countries.
The next was not an alarm but an earthquake in the form of global financial crisis of 2007-2009, which drove like a road roller over Latvian economy: lost a quarter of GDP and 10 per cent of economically active population.
Since that time, Latvia has more or less restored its economy and joined the euro area, transferring the monetary control to the European Central Bank (ECB). Just ECB together with the European Commission will have to defend economic interests of Latvia and other EU countries under the pressure of purposeful Donald Trump.
Fight will be serious. Just within few months the almost created EU-US single market, which was guaranteed by preparing for the signing an agreement on transatlantic trade and investment partnership, has turned into a confrontation between two powerful competitors in the Old and New World. And nobody can predict outcomes of this confrontation.
Fortunately, mankind has accumulated a large arsenal of investment flow control techniques. Which of them will select ECB and the European Commission in fight for the interests of Latvia, only time will tell.