What is the potential impact of President Trump?

Right after it became clear that Mr Donald J. Trump had become President Elect, like many of us, I started getting emails and WhatsApp messages asking the single question. What does this all mean? The wise reply is of course – we need to wait and see. But having said that, we can reasonably expect policy shifts in both immigration and taxation.

Immigration reform is expected. Singapore benefits from the US Visa Waiver Program (VWP) and with a machine readable passport and an ESTA (Electronic System for Travel Authorisation), there are usually no issues for holiday travellers. For certain non-VWP Countries, however, we should expect the imposition of “extreme vetting” of visa applications.

Citizens of countries with majority Muslim populations should therefore expect such “extreme vetting” if they intend to travel to the US. Also, immigration from certain regions or countries that presently cannot support safe vetting may be suspended.

Tax Reform may at last be possible given Republican control of both Houses. Proposals that may impact citizens and green card holders include reductions in the individual tax rate, elimination of the Alternative Minimum Tax, capping itemised deductions, and taxing carried interest at ordinary rates.

If the Federal corporate tax rate is reduced to 15%, this may make the US an attractive alternative to Singapore for, say, Indonesian exposed taxpayers, especially given the US’ uncertain stance on the Common Reporting Standard (CRS).

Singapore continues to punch above its weight in terms of investment in the US. Particularly with regards to US Real Estate, as certain well-known Singaporean brand names whom I will not mention, have been increasing their US exposure. The result is that in our firm’s routine work, we have been serving an increasing number of Singaporean citizens who have US property, and other equity investments.

They would be pleased by the proposals to virtually eliminate US Estate Taxes or the tax to be paid when the owner of US situs assets, passes. Critics have been quick to point out that his tax proposals, if approved, may lead to a further concentration in wealth.

To understand the potential impact for the region, we can look at the likely outcome of the Trans-Pacific Partnership (TTP). Prime Minister Lee is quoted as having said in August, during his state visit to the US that – 

"In terms of economic benefits, the TPP is a big deal. I think in terms of America’s engagement of the region, you have put [your] reputation on the line. It is the big thing that America is doing in the Asia Pacific [region] in the Obama administration."

"Your partners, your friends who have come to the table, who have negotiated, each one of them has overcome some domestic political objection, some sensitivity, some political cost to come to the table and make this deal. If at the end, waiting at the altar, the bride doesn't arrive, I think that people are going to be very hurt."

So it would appear that the bride would not make it to the wedding given the outspoken opposition to the TPP during the Presidential campaign by both sides. As the US becomes more internally focused, one can reasonably expect that internationally, a void would be created that would be filled by other powers.

Stepping back from this region and looking globally, we may be looking at a pivotal moment, where the institutions that shaped the post-World War II social order are in a state of flux. This social order has been led by a previously clear US Foreign Policy agenda, and supported by institutions, now in a state of flux like Europe, NATO, OPEC, and the WTO.

Let's keep an eye on how the 45th President of the United States fills his key advisory positions so that we may better understand what we should expect.