What Trump’s historic victory means for the global economy

Donald Trump’s election victory over Vice President Kamala Harris marks a return to the White House – a dramatic political shift that may have ramifications for the global economy.

Speaking to supporters in Florida early Wednesday, Trump said the “unprecedented and powerful order” would usher in a “golden age for America.”

The former president’s string of campaign promises include higher tariffs, tax cuts, regulatory clarifications and a push to withdraw from key global agreements.

Analysts say it is difficult to explain how much Trump will want to implement these measures in his second term of four years, but the results of any will have clear consequences around the world.

Lizzy Galbraith, political economist at asset manager Abrdn, says it remains to be seen exactly what presidential investors can expect when Trump returns to the White House.

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

“If Trump has unified control of Congress, as it seems likely and that’s what we expect to do in the next few weeks and days, he has a lot of freedom to put in the implementation of his tax cut plan, his deregulation plan, for example, but we may also see parts of his trade policy sitting close to that.”

Regarding fees, Galbraith says there are currently two schools of thought. Either Trump wants to use them as a negotiating tool to gain approval from other parties — or he’s making good on his promise and delivering on it broadly.

Trump once described “retribution” as his favorite word, calling it “the best word in the dictionary.”

In an effort to raise tariffs, Trump has suggested he could impose a 20% tariff on all US imports, with a tariff of up to 60% on Chinese goods and another of up to 2,000% on cars. built in Mexico.

Meanwhile, for the European Union, Trump said the 27-nation bloc would pay a “big price” for not buying American imports.

“Well, I think it’s important to point out that we think that in any case where Trump uses tariffs more often, his main target will be China. , which would hurt European companies – like something that is possible,” Galbraith said.

“So, it’s not our primary concern that you see something like base tariffs applied that would hurt European goods significantly although there is still a clear possibility that certain European products could be affected, ” he added.

Analysts have warned that Trump’s plan to impose global tariffs has the potential to raise prices for consumers and slow spending.

Ben May, director of global research at Oxford Economics, said that the direct impact of Trump 2.0 on economic growth may be limited in the near term, “but it overshadows the significant effects on trade and the structure of growth, and the markets of finances”.

For example, May said that in the event that more aggressive elements of Trump’s policy are adopted, especially tariffs, the impact will be “very large”.

“A key unknown is whether a clean sweep raises the risk that the Trump administration will push for more extreme policy measures, such as larger, more unpredictable tariffs,” May said in a research note.

“Uncertainty about Trump’s stance on the conflict in Ukraine and the Middle East also increases the risk of greater instability in both regions, which could affect regional and even global growth,” he said. add.

The prospect of a second Trump presidency has long been viewed as negative in Europe and the European Union as a whole.

However, analysts at Signum Global Advisors said in a research note on Wednesday that “much of that reality remains unappreciated.”

Indeed, they argued that a number of factors mean that the EU may be the “biggest loser of the second Trump era,” citing trade tensions, the ongoing disruption of key decisions by European policies and Trump’s desire to double down on America’s ability to attract capital. displacement.

Analysts at Macquarie Group said on Thursday that, on the face of it, Trump’s election victory is “bad news for Asia,” especially China, but the region is “more prepared” than in 2016, when he first moving to the White House.

“The main focus of the Trump campaign was the very high tariffs. Although they were well documented on the phone, the winds that may reach across Asia, especially China, should rise and compressing multiples is unlikely to exist,” a Macquarie Group analyst said in a research note.

“The balance of this is to accelerate China’s stimulus measures,” they added. “The Chinese government has outlined its ambitions to support economic growth at the level of 5% and to resolve the problems of the property market to support the confidence of domestic consumers.”

Mitchell Reiss, an American diplomat and senior fellow at the Royal United Services Institute (RUSI) think tank, said there are some differences in Trump’s playbook this time around.

“I think President-elect Trump has said that he would like to increase tariffs on China again until the playing field is level, in his opinion,” Reiss told CNBC’s “Squawk Box Europe” on Thursday. .

“What was interesting the last time Trump won was the number of China hawks who were working his administration. This was a very difficult administration in terms of personnel and in terms of vision of how they saw China as an adversary, expansion in the South. The China Sea is against the values ​​of America and friends and partners around the world,” he continued.

“So, I don’t think that’s going to change. I think that might be mitigated a little bit by the economic partnership that we have with China, but I think it’s going to be a complicated relationship going forward.”