The global economy is experiencing significant shifts following Donald Trump’s victory in the 2024 US presidential election. As financial markets and world leaders react to the news, economists are analyzing the potential long-term implications of Trump’s return to the White House.
Immediate Market Response
In the wake of Trump’s election, US shares hit record highs on Wall Street, with banks performing particularly well. The dollar strengthened against major currencies, including the pound, euro, and Japanese yen, rising by approximately 1.65%. Bitcoin also reached an all-time high, reflecting the market’s initial positive reaction to the election results.
Investors are betting on the implementation of Trump’s campaign promises, including tax cuts and increased tariffs. These expectations are driving up inflation forecasts and reducing the anticipated speed of interest rate cuts. The non-partisan Committee for a Responsible Federal Budget projects that Trump’s spending and tax pledges could increase US debt by $7.75 trillion through 2035.
Global Economic Implications
Trump’s victory has far-reaching consequences for the global economy. Emerging markets that rely on dollar funding may face more expensive borrowing costs due to the strengthening US currency. This could potentially lead to economic challenges for developing nations and impact global trade dynamics.
European economies, particularly export-driven ones like Germany, are bracing for potential impacts. Trump’s campaign promise to impose a 10% tariff on imports from all countries could significantly affect nations like Germany, where exports to the US account for around 3.8% of GDP. This protectionist stance may reshape global trade relationships and supply chains.
Regulatory and Policy Outlook
Wall Street executives are anticipating a more business-friendly regulatory approach under Trump’s second term. This expectation has contributed to the positive market response, particularly in the financial sector. However, critics warn that deregulation could lead to increased economic risks and potential market instability in the long term.
The Federal Reserve’s monetary policy may also face new challenges. With Trump’s history of criticizing the central bank, there are concerns about potential political pressure on interest rate decisions. This could have significant implications for inflation management and overall economic stability.
International Relations and Trade
Trump’s return to office is likely to reshape international economic relations. His ‘America First’ policy and skepticism towards multilateral trade agreements could lead to a reconfiguration of global trade partnerships. Countries may need to renegotiate trade deals or seek alternative economic alliances in response to changing US policies.
The relationship between the US and China, the world’s two largest economies, will be particularly crucial. Any escalation in trade tensions or tariffs could have ripple effects across global markets and supply chains, potentially slowing economic growth worldwide.
Looking Ahead: Economic Forecasts
As the world adjusts to Trump’s election, economic forecasts are being rapidly updated. While some sectors and markets have initially responded positively, there are concerns about long-term economic stability and growth. The potential for increased protectionism, higher inflation, and growing national debt are key factors that economists will be closely monitoring in the coming months and years.
The global economy’s resilience will be tested as it navigates this new political landscape. Countries and businesses alike will need to adapt to potential policy shifts and market volatility, making flexibility and strategic planning more crucial than ever in the post-2024 election world.
Sources :
https://www.weforum.org/stories/2024/11/economics-news-us-election-8-november-2024/
https://economic-research.bnpparibas.com/html/en-US/Economic-Scenario-12-November-2024-11/12/2024,50014
https://www.reuters.com/markets/ecbs-villeroy-trumps-economic-agenda-risks-global-economy-return-inflation-2024-11-13/
Cover photo from AP Photo /Julia Demaree Nikhinson