A worker places textile export orders at a production workshop of a textile company in Binzhou, China, July 8, 2024.
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Donald Trump's election victory over Vice President Kamala Harris marks a historic return to the White House – an extraordinary political comeback that is likely to have seismic effects on the global economy.
In a speech to his supporters in Florida early Wednesday, Trump said an “unprecedented and powerful mandate” would usher in “the golden age of America.”
The former president's campaign promises include high tariffs, tax cuts, deregulation and a push to withdraw from key global agreements.
Analysts say it is difficult to determine the extent to which Trump will seek to implement these measures in his second four-year term, but the consequences of them will have clear effects around the world.
Lizzy Galbraith, political economist at asset manager Abrdn, said it remains to be seen what exact presidential style investors can expect if Trump returns to the White House.
“Congress has a really big role to play in this,” Galbraith told CNBC’s “Squawk Box Europe” on Thursday.
“If Trump actually has unified control of Congress, which is very likely and what we expect in the next few weeks and days, then he will have greater latitude, for example, to implement his tax cutting agenda, his deregulation agenda,” but we probably will also see elements of his trade policy aside.”
When it comes to tariffs, Galbraith said there are currently two schools of thought. Either Trump tries to use it as a negotiating tool to obtain concessions from other parties – or he keeps his promise and implements it much more comprehensively.
Trump's favorite word
Trump has previously cited “tariff” as his favorite word, calling it “the most beautiful word in the dictionary.”
To raise revenue, Trump has suggested he could impose a flat 20% tariff on all goods imported into the U.S., with the tariff reaching up to 60% on Chinese products and up to 2,000% on Mexican-built vehicles.
For the European Union, meanwhile, Trump said the 27-nation bloc would pay a “heavy price” for not buying enough American exports.
Former US President Donald Trump arrives during a “Get Out The Vote” rally in Greensboro, North Carolina, USA, on Saturday, March 2, 2024.
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“I think it's worth pointing out that we believe that in any situation where Trump frequently uses tariffs, his primary focus will be on China. And we don't see Trump's secondary tariff promise – this basic tariff – which would hurt European companies – because it would be anything,” Galbraith said.
“So it's not necessarily our base case that something like a base tariff is applied that would really hurt European goods, although there is still a distinct possibility that certain European products could be affected,” she added.
Analysts have warned that Trump's plan to impose universal tariffs will most likely raise prices for consumers and slow spending.
Europe
Ben May, director of global macro research at Oxford Economics, said Trump 2.0's direct impact on economic growth is likely to be limited in the short term, “but it masks significant impacts on trade and the composition of growth, as well as on financial markets.”
May, for example, said that in a scenario where the more radical aspects of Trump's policy agenda were adopted, particularly regarding tariffs, the impact would be “very significant” globally.
“A key uncertainty is whether a clean break increases the risk that a Trump administration will impose more extreme policies such as higher, less targeted tariffs,” May said in a research note.
“Uncertainty over Trump’s stance on the conflicts in Ukraine and the Middle East also raises the risk of greater instability in both regions, which could hurt regional and even global growth,” he added.
The prospect of a second Trump presidency has long been seen as a negative for Europe and the European Union in general.
Still, analysts at Signum Global Advisors said in a research note on Wednesday that “the magnitude of this truth continues to be underestimated.”
Indeed, they argued that several factors mean the EU is likely to be “the biggest loser of a second Trump era,” citing trade tensions, ongoing frustration with key policy decisions in Europe and Trump's likely desire to exploit America's advantage in attracting capital Laying.
Asia
Analysts at Macquarie Group said on Thursday that Trump's victory was, on its face, “bad news for Asia”, particularly China, but that the region was “better prepared” than it was in 2016, when he first entered the White House.
A cargo ship approaches the pier of a foreign trade container terminal at Qingdao Port, Shandong Province, Qingdao, China, June 7, 2024.
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“A central tenet of Trump’s campaign was higher tariffs. The headwinds expected to sweep across Asia, particularly China, while well illustrated, are likely to increase volatility and depress metrics as uncertainty prevails,” a Macquarie Group analyst said in a research note.
“A counterbalance to this is a likely acceleration of stimulus measures in China,” they added. “The Chinese government has already outlined its ambitions to support economic growth at the 5 percent level and address problems in the real estate market to boost domestic consumer confidence.”
Mitchell Reiss, an American diplomat and distinguished fellow at the Royal United Services Institute (RUSI) think tank, said there would likely be some differences from the Trump playbook this time.
“I think President-elect Trump has said in his opinion that he would like to increase tariffs against China again until there is a level playing field,” Reiss told CNBC's “Squawk Box Europe” on Thursday.
“In Trump's last victory, it was interesting how many China hawks occupied his government. This was a very tough administration, both in terms of personnel and in the way they viewed China as an adversary and expansionist in the South.” “The China Sea is at odds with American values and friends and allies around the world,” he continued continued.
“So I don’t think that’s going to change. I think that could be somewhat mitigated by the economic interaction we have with China, but I think it will be a complicated relationship going forward.”
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