What Trump’s historic election victory means for the global economy

Donald Trump’s election victory over Vice President Kamala Harris marks a historic return to the White House, an unusual political return that is likely to have a major impact on the global economy.

President Trump told supporters in Florida early Wednesday that his “unprecedented and powerful mandate” would usher in a “golden age for America.”

The former president’s list of campaign promises includes higher tariffs, tax cuts, deregulation and a push to withdraw from major global agreements.

Analysts say it is difficult to determine the extent to which President Trump will try to implement these measures during his second four-year term, but the results will have a clear impact around the world. are.

Lizzy Galbraith, a political economist at asset management firm Abdon, said it remains unclear exactly what style of presidency Trump will expect when he returns to the White House.

“Congress has a huge role to play in this,” Galbraith told CNBC’s “Squawk Box Europe” on Thursday.

“If Mr. Trump does indeed gain unified control of Congress, which is very likely, and we expect to happen in the coming weeks and days, then Mr. Trump will have, for example, tax cuts. It’s going to give him more latitude to implement policies, deregulation policies, etc. But we’re also likely to see elements of his trade policy as well.”

Galbraith said there are currently two schools of thought regarding tariffs. Either President Trump will try to use policy as a bargaining tool to extract concessions from other parties, or he will make good on his promises and implement policy more broadly.

President Trump has previously cited “tariff” as his favorite word, calling it “the most beautiful word in the dictionary.”

Aiming to boost revenue, President Trump has imposed a flat 20% tariff on all goods imported into the United States, with tariffs of up to 60% on Chinese products and up to 2,000% on cars manufactured in Mexico. It was suggested that there is a sex.

Meanwhile, regarding the European Union, President Trump said the 27-nation bloc would pay a “huge price” for not buying enough U.S. exports.

“By the way, I think it’s worth pointing out that in any situation where President Trump frequently uses tariffs, we think his primary focus is on China. And President Trump’s secondary tariff commitments , so we’re not looking at basic tariffs.”That would hurt European companies, but it’s very possible,” Galbraith said.

“So while there is still a clear possibility that certain European products will be affected, it is not necessarily our base case that something like basic tariffs will be applied that actually harm European products.” he added.

Analysts have warned that President Trump’s plan to impose universal tariffs is likely to raise prices for consumers and slow consumption.

Ben May, director of global macro research at Oxford Economics, said the direct impact of Trump 2.0 on economic growth is likely to be limited in the short term. “The structure and the major impact on financial markets are being hidden.” ”

For example, Prime Minister Theresa May said that the more radical aspects of Trump’s policy agenda, particularly a scenario in which tariffs are adopted, would have a “huge” impact around the world.

“A key unknown is whether the sweep increases the risk that the Trump administration will pursue more extreme policy measures, such as larger, more targeted tariffs,” May said in a research note. said.

“Uncertainty surrounding President Trump’s stance on the conflicts in Ukraine and the Middle East also increases the risk of destabilization in both regions, which could negatively impact regional and, by extension, global growth.” he added.

The possibility of Mr Trump becoming president for a second time has long been seen as a negative for Europe and the wider European Union.

But “the magnitude of that truth remains underappreciated,” analysts at Sygnum Global Advisors said in a research note Wednesday.

Indeed, they argue that several factors mean the EU is likely to be the “biggest loser of the second Trump era”, with trade tensions, continued pressure on key European policy decisions He cited President Trump’s desire to double the United States’ advantage in attracting capital. transfer.

Analysts at Macquarie Group said on Thursday that Mr Trump’s election victory was “bad news for Asia, and particularly China” at face value, but that the region was “more prepared than it was in 2016, when he first took over the White House”. “There is,” he said.

Analysts at Macquarie Group said: “A key tenet of the Trump campaign was to raise tariffs. The well-publicized headwinds likely to blow into Asia, particularly China, are likely to cause volatility to spike amid widespread uncertainty. “This should compress the multiple,” he said in a research note.

“In response, China is likely to accelerate its stimulus efforts,” they added. “The Chinese government has already outlined its ambitions to support economic growth at the 5% level to support domestic consumer confidence and address the real estate market woes.”

Mitchell Rees, an American diplomat and distinguished fellow at the Royal United Services Institute (RUSI) think tank, said there are likely to be some differences in Trump’s strategy this time around.

“I think President-elect Trump has said that in his opinion he wants to raise tariffs on China again until the playing field is leveled,” Reese said Thursday on CNBC’s “Squawk Box Europe.” .

“What was interesting the last time Trump won was that he had a lot of China hawks in his administration, both in terms of personnel and in terms of their view of China as an adversary, an expansionist in the South. “This was a very harsh regime that went against the China Sea and against America’s values ​​and our friends and allies around the world,” he continued.

“So I don’t think that will change. Economic exchanges with China may ease it a little, but I think it’s going to be a complicated relationship going forward.”