donald trump <u+2019>s upset victory may be the biggest shock to the world economic system since the financial crisis. it represents, along with britain<u+2019>s vote in june to leave the european union, a profound rejection of the postwar global economic order that could leave a cloud of uncertainty over the u.s. and world economies for months,<u+00a0>if not longer. mr. trump<u+2019>s victory, like brexit , is another sign that the dominant divide in the world is no longer left versus right but national versus global, working class versus elite, populist versus establishment. this means mr. trump is no ordinary president-elect. though nominally a republican, he campaigned<u+00a0>on a platform that fused traditional republican promises of less regulation and lower taxes with a populist attack on globalism in all its forms: free trade, immigration, and international finance. how that platform will find its way into policy remains a mystery. mr. trump<u+2019>s highly elastic positions, from taxes and immigration to the minimum wage and regulation, make it difficult to know what he will prioritize. his team of economic advisers is small and largely unknown to investors and foreign policy makers. this creates multiple questions over where the u.s. will head under a trump administration.<u+00a0>that uncertainty will likely prompt investors, businesses and households to hold off on big decisions. stocks and stock-index futures outside the u.s. sank wednesday<u+00a0>on mr. trump<u+2019>s victory not necessarily because the economy<u+2019>s<u+00a0>outlook is darker, but because there are so many more alternative scenarios now. uncertainty is two-sided: things could be worse than expected, but they could easily be better, given how low expectations<u+00a0>are for mr. trump<u+2019>s leadership. a survey of business economists in august found 55% thought hillary clinton would do the best job of managing the economy; just 14% thought mr. trump would, behind third-party candidate gary johnson. that<u+2019>s a low bar for mr. trump to clear. and by itself, uncertainty won<u+2019>t snuff out economic growth. political upheaval has become routine since 2008. events such as the 2011 standoff over the u.s. debt ceiling and brexit haven<u+2019>t knocked national economies off course. still, <u+201c>if just a fraction of ceos pause on their hiring plans, you could see job growth flatten out as people digest whether the president is going to be a positive business leader or the erratic person that we<u+2019>ve seen in the campaign,<u+201d> says marc sumerlin, an independent policy analyst and former aide to president george w. bush. adds andy laperriere, policy analyst for brokerage cornerstone macro: <u+201c>the big question for markets is which factor is larger: the trade risk under trump or a potentially positive economic package? that<u+2019>s what investors will be focused on.<u+201d> in the optimistic scenario, mr. trump<u+2019>s lack of ideological anchor is a virtue.<u+00a0> <u+201c>i make deals. i negotiate,<u+201d> he said earlier this year. he wants a tax cut and would be happy to let house speaker paul ryan design it. house republicans have unveiled proposed<u+00a0>cuts to individual and corporate rates with half the deficit impact of mr. trump<u+2019>s, which would add roughly $6 trillion to the deficit over 10 years. he can score points with business by rolling back president barack obama <u+2019>s executive orders, such as the clean power plan, which caps greenhouse-gas emissions for power plants. with congress in republican hands, he can move to repeal mr. obama<u+2019>s health-care and financial regulation laws. on trade, mr. trump would try to renegotiate the north american free trade agreement with mexico and canada before abrogating it. mexico would likely recognize it is better to accept some restrictions on its exports than lose preferential access altogether. similarly, mr. trump can label china a currency manipulator as a catalyst for negotiations. in the past, the threat of action from congress has often prompted china to act, for example by guiding its currency higher. what are the more pessimistic scenarios? they involve mr. trump being tripped up by his temperament and political inexperience. his relations with mr. ryan, the most powerful republican in congress, are frosty. they could end up at loggerheads, for example if mr. ryan wants to match the tax cut with reduced entitlements. on trade, mr. trump<u+2019>s objections are fundamental , not cosmetic. he wants a smaller trade deficit and more manufacturing jobs for americans, and <u+200b>it<u+2019>s hard to think of any<u+200b>concessions by mexico and china that can achieve that. both nations would face a backlash at home if they are seen surrendering to an american bully. if negotiations go nowhere, mr. trump would almost certainly resort to unilateral action such as sharply higher tariffs, which he has noted he<u+00a0>can do<u+00a0>with existing authority and without congress<u+2019>s assent. unilateral tariffs by the u.s. would give its trading partners little choice but to retaliate. mr. trump<u+2019>s tendency to personalize policy disputes is also a wild card for business and investors, who would otherwise welcome a republican at the head of the federal administrative apparatus. he has promised to replace janet yellen, the federal reserve chairwoman, who he accused of trying to help mr. obama with low interest rates, and to stop at&t inc. <u+2019>s merger with time warner inc. because he feels mistreated by cnn, which is owned by time warner. will mr. trump tone down such rhetoric because it<u+2019>s unpresidential, or dial it up because it<u+2019>s a potent use of presidential power? that, too, is yet another question mark over the next four years. write to greg ip at greg.ip@wsj.com
donald trump<u+2019>s win underscores divide in global economic order - wsj
greg ip