Trump's insularity may expose America's global vulnerability

IN promoting an "America First" economic policy, Donald Trump appears to be blinding himself to the fragile state of the global economy; he also seems to be ignoring how deeply the US economic and financial system is integrated with that of the rest of the world. This raises a significant risk that his economic policies could destabilise the world economy, and bring untoward consequences for the US economic recovery.

His disdain for multilateral lending institutions is particularly worrying, as is his scepticism about the need for continued US economic leadership. This could be dangerous for the global financial system. Years of highly unorthodox monetary policies have created an international credit bubble - and it could burst.

Among Mr Trump's immediate challenges is China, the world's second largest economy and, until recently, the major source of global growth. China's investment-led economic growth model has almost reached its limit and its own credit bubble is almost ready to burst. China's capital outflow problem is again gaining momentum and the Chinese authorities do not have good exchange-rate policy options to stem the deluge.