A worker places an order for textile exports at a factory in Binzhou, China, on July 8, 2024.
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The election of Donald Trump over Vice President Kamala Harris marks a significant comeback to the White House that could greatly influence the global economy.
In an address to supporters in Florida early Wednesday, President Trump proclaimed that his “unprecedented and powerful mandate” would lead America into a new “golden age.”
The former president’s campaign platform includes promises for increased tariffs, tax reductions, deregulation, and a commitment to withdraw from key international agreements.
Experts express uncertainty about the extent to which President Trump will pursue these initiatives during his second term, but they expect substantial global consequences.
Lizzy Galbraith, a political economist at the asset management firm Abdon, remarked that it remains ambiguous what kind of presidency Trump will embody upon his return to power.
“Congress plays a critical role in this,” Galbraith noted during her appearance on CNBC’s “Squawk Box Europe” this Thursday.
“If Mr. Trump achieves unified control of Congress, which seems quite possible in the near future, he is likely to gain more flexibility in carrying out tax cuts, deregulation, and other policies, alongside his trade strategies.”
Galbraith indicated two possible perspectives regarding tariffs: Trump may either use them as leverage in negotiations or execute his promises more comprehensively.
Trump’s Tariff Focus
President Trump has previously declared “tariff” as his favorite term, referring to it as “the most beautiful word in the dictionary.”
In an effort to increase revenue, Trump has implemented a 20% tariff across all goods imported into the United States, with tariffs reaching as high as 60% on products from China and as much as 2,000% on cars manufactured in Mexico.
He has suggested that the European Union would incur a “significant cost” for not purchasing sufficient U.S. exports.
Former President Donald Trump arrives for a “Get Out The Vote” rally in Greensboro, North Carolina, on March 2, 2024.
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“It’s important to note that whenever President Trump employs tariffs, his primary target appears to be China,” Galbraith explained. “For secondary tariffs, although European companies might face impacts, it’s not a certainty.”
“While there’s a chance some European products could be affected, it doesn’t mean we expect basic tariffs that would significantly damage European interests,” she continued.
Experts have warned that Trump’s approach to imposing broad tariffs could lead to increased consumer prices and a reduction in spending.
Implications for Europe
Ben May, director of global macro research at Oxford Economics, indicated that the immediate effects of Trump’s second term on economic growth might be minimal. He stated that much of the impact on financial markets remains uncertain.
For example, former Prime Minister Theresa May noted that any more radical aspects of Trump’s policy agenda, particularly involving tariffs, could have far-reaching effects globally.
“A significant unknown is whether the increased majority will lead the Trump administration to adopt more extreme policies, such as larger, targeted tariffs,” May highlighted in a research document.
“Uncertainty around Trump’s position on conflicts in Ukraine and the Middle East raises the risk of instability in these regions, which could adversely affect both regional and global economic growth,” he added.
The prospect of Trump returning to the presidency has long been viewed unfavorably by Europe and the broader European Union.
However, analysts at Sygnum Global Advisors suggested that “the scale of this reality is often underestimated.”
They posit that multiple factors indicate the EU may experience the most significant drawbacks during Trump’s second term, including trade tensions and ongoing pressures impacting major European policy decisions, complemented by Trump’s objective to enhance the U.S. appeal for capital flows.
Reactions in Asia
Analysts from Macquarie Group stated Thursday that Trump’s election victory represents troubling news for Asia, particularly China, but noted that the region is now “better equipped” than during Trump’s initial term in 2016.
A cargo vessel approaches the foreign trade container terminal in Qingdao Port, Shandong Province, China, on June 7, 2024.
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According to analysts at Macquarie, “One of the central themes of Trump’s campaign was increasing tariffs. The anticipated challenges are likely to heighten volatility in Asia, especially China, as uncertainty pervades.”
“In reaction, China is expected to expedite its stimulus measures,” they added, noting that the Chinese government aims to bolster economic growth and support consumer confidence to address issues in the real estate sector.
Mitchell Rees, an American diplomat and prominent fellow at the Royal United Services Institute (RUSI), mentioned that Trump’s approach may differ this time.
“President-elect Trump has expressed a desire to raise tariffs on China until equity is achieved,” said Rees on CNBC’s “Squawk Box Europe.”
“During Trump’s last election, many in his administration were known for their aggressive stance on China, viewing the country as a significant adversary. The same sentiment appears likely this time, with economic interactions possibly becoming more complex without easing tensions,” he concluded.
