Trump’s intention to build security wall between Mexico and US border has been heated up recently until it became a causation for the partial US government shut down. The issue has become the most divisive factor in US recent politics. During this longest government shut down in US history, US markets have basically been muted. After government resumed open up, business went on as usual as if nothing has happened.
However, President Trump fore warned that if negotiation for the border wall with the Democrats is not going through, another shut down would possibly happen again this Friday. And Trump would possibly use emergency plan to build the wall using military funding instead. The bottom line for us as international investors is this; Would it matter to us in global economy for the building of Mexican-US security wall?
Obsolete Wall Project
In the first instinct, when Trump proposed the security wall building project as one of his primary presidential campaign promises, I thought it was an obsolete idea and a waste of money. Just like what Democrats have been opposing, I thought the US government should use instead modern technologies such as sensors, cameras and drones for detection to prevent illegal immigrants crossing.
When I did a little bit of research on the subject and realized that the border wall in fact is not a new project. The wall has already been built by previous presidential eras, especially starting from President Bush. But it was not wall but fences of different types, and it was also not completely fenced off the entire border due to various complicated reasons.
Secondly, the US government has been using modern technologies as mentioned for a long while. But it was not effectively enough to resolve the issue. That’s the reason why President Trump is so strong in proposing his wall project as part and foremost important border security measure. By the way, what Trump is proposing to build is also not a wall, but fencing as well with see through steel or solid structure like. The major difference is that he wanted to complete the fence off the entire nation with Mexican border.
The question under discussion here is how effective it will be or does it matter to global economy if the security wall or multi billion dollar project fence is built or not built?
For short, if it doesn’t build, there is no more economic stimulus to US economy going forward. The fear of global economic slowdown will arrive US shore. If the project is built, there would be economic activities going on for the US in house. The current 5.7 billion budget under Trump’s pressing on Congressional approval is only a part of the parcel of the entire project. In fact, Trump already has been doing part of the Wall building piece and pieces in the past.
If this project is through, there will be much more construction projects coming up next. The US. President Trump is reportedly proposing rebuilding for the aging infrastructure of the nation. If this is true, these rebuilding and construction activities will possibly carry US economy through a few more years without affected by global economy recession.
As the largest global economy, US stands about a quarter of the entire world GDP (Chart A). If there is no recession in the US, there would possibly be no recession in the world at large too.
In the past, the US economy was strongly tied with the other global economies. Anything happened with the rest of the world, US will be affected. But since Trump has become the US president, he has changed the entire game plan with his “American First” policy. While the rest of the world is now suffering from slowdown, US is the only country with still strong and healthy economic data.
Unless Trump doesn’t get his Wall built, the US economy in particular and the world at large will suffer slowdown this year and the global recession will be possibly brought in by next year.
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The view and opinion expressed are personal views of the author and are subject to change based on market and other conditions. This write up does not constitute sole advice for investment decision. Investors are advised to do further reading and research to conclude individual decision.