With one swift swipe of the pen (probably a thumb over a Twitter key, come to think of it) Donald Trump has sunk the Trans-Pacific Partnership (TPP). Or so it appears. The 12-nation trade pact loses much of its meaning without the world's largest economy, and leaves the United States looking at a long four (or eight) years of testy bilateral negotiations with individual nations on trade and services.
What does that mean here in Asia? The biggest gainer, on the face of it, is China. The Middle Kingdom wasn't allowed in the TPP club, and sulked about that as it prepared its own alternative trade pact in Asia, the Regional Comprehensive Economic Partnership (RCEP).
That is largely a toothless deal that lacks the intellectual-property protections so carefully built into the TPP, which China was going to find impossible to follow. In fact, given that the IP sections of the agreement were new and covered areas often excluded from existing bilateral deals, the TPP would be far more influential in its effect on service industries rather than on basic manufacturing.
So Trump's hatred of the TPP and concentration on the manufacturing jobs "lost" to Asia, China in particular, missed the point. Free trade would have reduced prices for goods sold in the United States and opened up markets, in Japan in particular, to U.S. products and services such as agriculture, drug manufacturing and education. Without participation, the United States is looking at higher prices and therefore higher inflation.
If Trump attacks companies doing business in China as much as he has already done with U.S. operations in Mexico, they will shift manufacturing to nations paying cheaper wages, such as Vietnam -- which was expected to be the biggest beneficiary of the TPP. Even smartphone manufacturers can't compete on price with Asia-made competitors, without components produced in Asia.
China is now in the catbird seat, leading not only "RCEP" but also initiatives such as the One Belt, One Road (OBOR) scheme. That seeks to build new infrastructure networks linking China and East Asia through the "'Stans" on land and Southeast Asia by sea to Eastern and on into Western Europe.
"OBOR" is well under way. The first train from China to London, a 7,500-mile trip that took 18 days, arrived last week, two weeks faster than the sea-bound route, and at half the price of air freight. It's also considerably more environmentally friendly than either other option. Air burns fuel like crazy, and the 15 largest ships worldwide produce as much pollution as the entire world's stock of cars, now at 760 million.
And China has just scored a major success with the vehicle that will be funding the Belt and Road infrastructure, as well as projects throughout Asia, Europe and Africa. The Asian Infrastructure Investment Bank that it founded already has 57 member nations. Despite U.S. protestations, allies such as the United Kingdom and Australia were some of the first to sign on. Now another 25 or so countries in Africa, Europe and South America are set to join the AIIB this year, according to its president, Jin Liqun.
The bank holds its annual meeting this June, with Ireland, Canada, Ethiopia and Sudan likely to be among the new member states. The AIIB continues to hold its door open to the United States and Japan, and Jin said last November that the U.S. position was softening. Like with just about everything else, there's disagreement within the Trump camp about whether or not to join.
Australia and New Zealand now say they'll push on with the TPP as "12 minus One," leaving 11 countries in the pact after the United States withdraws. Japan's prime minister, Shinzo Abe, says the deal without U.S. participation would be pointless.
Instead, Abe plans to lobby Trump to change his mind, Japan being the only nation that had actually ratified the TPP. Abe has something of an in -- he was the first world leader to meet Trump in person after his election, and is a key ally in balancing out China's influence in Asia.
Essentially, Asia still has no idea what to make of Donald Trump, as I explained on his inauguration day. He has talked tough on China and Japan on jobs, is or isn't a protectionist on trade, depending on who you ask and how he feels on the day, and has been happy enough to do business under the Trump brand in developing nations such as Indonesia.
In the case of a trade war, China likely has more to lose than the United States. But it's worth noting that China's trade surplus is in part due to multinational corporations, many of them American, that operate in both nations. Low-cost borrowing in the United States under virtually zero interest rates, Nomura notes, can be put to use generating equity-like returns when pumped into business in China.
One key result of Trump's attack on the TPP, and promise to raise tariffs, is that Asian nations will likely refocus their efforts on intra-Asian trade. The region boasts the second-a and third-largest economies after all, and will probably get along just fine if Trump choses to block the United States off.
So it's U.S. consumers, not Asian manufacturers, who stand to lose from an isolationist stance. Don't expect any earthquakes in economic growth in this part of the world.
China's growth in 2016 hit, surprise, surprise, 6.7%, basically the rate that Beijing commanded. The fourth quarter, at 6.8%, was one basis point over expectations. With the 19th congress of the Communist Party taking place this fall, China will likely ensure stable growth -- its March meeting sets the target, expected to be 6.5% for 2017.
That and a Japan emerging from two decades of economic stagnation bode well for Asia. If only the Trump administration could recognize that "alternative fact."