Click image to enlarge

Three themes will dominate “Obamanomics” impact on American manufacturers in the months ahead.

That's the word form a leading industry economist who says although President-elect Obama has had just a couple of weeks to start defining his approach, there are a few clues that bear monitoring. In the new latest newsletter from the Fabricators & Manufacturers Association, International, economic analyst Chris Kuehl suggests keeping an eye on trade policies, reactions to the recession and new regulations.

“Trade policies seem to reflect the Democratic Party's agenda more than Obama's, but he has yet to suggest that he will take a different position,” Kuehl says. “The notion is that trade is not necessarily a good thing and that the United States has a right to engage in protectionism.”

That position has provoked some real concerns from trading partners in Europe and Asia and some criticism from the likes of the WTO, IMF and various trade groups. Also, Obama indicated he would look at all the current trade agreements and evaluate them, a statement that creates consternation among supporters of NAFTA and CAFTA, as well as those who seek better relations with Europe in general.

“The impact on manufacturing will depend largely on where a given company stands,” Kuehl said. “Those getting hammered by overseas competition may see some policies enacted that protect them, but those that have started to discover the joys of export are likely to see some of those markets slam closed.”

Recession handling is another area to watch.

---

According to Kuehl, initial thoughts from the Obama economic team are heavier on fiscal solutions than monetary ones.

“In all fairness, the monetary approach has been pretty fully exploited at this juncture and there isn't much left for the Fed to do,” he said. “The IMF has been urging countries all over the world to engage in fiscal stimulus and many have reacted” China, for example just dumped close to $600 billion into their own stimulus package and the United States is now considering what else can be done to bail out the auto industry.

“The Obama response to the economy will lean heavily on government spending programs despite the impact this will have on the federal deficit and the U.S. debt position globally,” Kuehl said. “The Democrats also are seeking to keep some of their campaign priorities on the table, but that may prove much harder to do. If there is a major government push on recession it will likely take the shape of some kind of infrastructure development effort, and that could be a boon to the manufacturers serving that sector.”

Click image to enlarge

And Obama's push to "fix" the system once the recession crisis passes will lead to more regulation.

“The Fed is already more engaged in the U.S. banking system than ever before, and that involvement will likely expand,” he said. “The Treasury Department is already a part owner of most of the major banks in the country, a leading insurance company, and perhaps, in time, the Big Three auto companies. That gives the U.S. government a major stake in the performance of its largest companies, which will mean direction and advice.

---

The real question is what else follows from this?

At the moment, Kuehl suggests, the mood is waffling between micro-managing the economy, and establishing more transparency but leaving the markets to control themselves. The economic team that Obama has assembled thus far has elements of both positions, but the dominant players seem to be more free-market than not.

“A more control-oriented approach will slow the recovery of the banks and money markets, and will make access to credit challenging in the months and years ahead,” he said.

Rockford, Illinois-based Fabricators & Manufacturers Association, Intl. is a professional organization with more than 2,300 members working together to improve the metal forming and fabricating industry. For more information on the organization visit http://www.fmanet.org/