Donald Trump’s victory over Vice President Kamala Harris marks a stunning return to the White House, setting the stage for a political comeback that could have far-reaching consequences for the global economy. Addressing supporters in Florida, Trump declared that an “unprecedented and powerful mandate” would usher in what he calls “the golden age of America.” His sweeping campaign promises include significant tax cuts, deregulation, and tariffs, along with a push to withdraw from key international agreements. However, experts remain uncertain about how these proposals will unfold during his second term, with any potential shifts likely to send ripples through the global economy.
Uncertainty Surrounding Trump’s Policy Agenda
Lizzy Galbraith, political economist at asset manager Abrdn, emphasized the uncertainty surrounding the policies Trump may implement upon returning to office. “Congress has a major role to play in shaping his presidency,” Galbraith explained during an appearance on CNBC’s Squawk Box Europe. “If Trump gains unified control of Congress, which appears likely, he could have more flexibility to push through his tax-cutting and deregulatory plans, along with trade policies.”
One area of particular interest is Trump’s stance on tariffs, particularly with China. Galbraith noted that there are two possible scenarios: Trump might use tariffs as a negotiating tool, or he could take a more hardline approach, implementing them more broadly.
The Tariff Strategy: A Double-Edged Sword
Trump has long been a vocal proponent of tariffs, famously calling them “the most beautiful word in the dictionary.” He has previously suggested imposing a 20% blanket tariff on all imported goods, with an even steeper 60% on Chinese products and as high as 2,000% on vehicles manufactured in Mexico. He also indicated that the European Union would face consequences for not purchasing enough American exports.
While Trump’s primary focus would likely remain on China, analysts like Galbraith argue that a blanket tariff on European goods may not be feasible, though certain European products could still be targeted. Despite this, the potential for broad tariff implementation remains a significant risk, with economists warning that such measures would likely increase consumer prices and reduce spending.
Global Economic Implications
Ben May, director of global macro research at Oxford Economics, stated that the immediate impact of Trump’s return to office on economic growth might be limited. However, he highlighted that Trump’s radical policy measures, particularly those involving tariffs, could have “very sizable” effects on global trade and economic stability. May also pointed out that Trump’s stance on conflicts in Ukraine and the Middle East could introduce further instability, potentially dampening global growth.
Europe has long been viewed as a potential loser in a second Trump administration. Signum Global Advisors noted that the EU’s dissatisfaction with Trump’s approach, combined with his preference for prioritizing American interests, could leave Europe vulnerable. The advisors added that Trump’s drive to enhance America’s position as a hub for capital could further strain relations with European nations.
Asia’s Mixed Outlook
Trump’s policies are expected to have a notable impact on Asia, especially China, where tariffs are likely to increase under his administration. However, analysts at Macquarie Group suggest that Asia, particularly China, is more prepared than it was during Trump’s first term. They predict that while the region will face some volatility and economic uncertainty due to higher tariffs, China’s government is already taking steps to stabilize its economy, such as accelerating stimulus measures to support domestic growth and consumer confidence.
Mitchell Reiss, an American diplomat and fellow at the Royal United Services Institute (RUSI), echoed similar sentiments, noting that while Trump’s administration may adopt a tougher stance on China, the economic interaction between the two countries will likely temper the intensity of their relationship. Despite this, Reiss warned that the US-China dynamic will remain a complex issue, especially in light of Trump’s tough-on-China rhetoric.
A Changing Global Landscape
Trump’s return to the White House is set to reshape the global political and economic landscape. While his policies remain somewhat unclear, the potential for sweeping changes is undeniable. Whether it’s through tariffs, trade policy shifts, or a more aggressive foreign policy, the world will need to brace for the ripple effects of Trump’s second term—a term that promises to be just as unpredictable and far-reaching as his first.
