Trump Secures 2024 Victory as 47th U.S. President: How Will His Policies Reshape Markets and Global Trade?

Following Trump’s 2024 victory over Kamala Harris, which secured him a second term, substantial policy shifts are expected across multiple domains. Trump garnered 292 electoral votes, capturing pivotal battleground states including Georgia, North Carolina, Pennsylvania, and Michigan, while Republicans reclaimed control of the Senate, setting a strong legislative foundation for his administration​.

 Source: POLITICO1. Fiscal Policy

Trump’s win may signal the continuation or even expansion of the 2017 Tax Cuts and Jobs Act (TCJA), potentially introducing further reductions in corporate and personal tax rates. The administration's approach appears set to focus on expansionary fiscal policies to stimulate U.S. growth. However, with Trump's campaign downplaying debt concerns, the U.S. national debt is projected to rise by $7.75 trillion over the next decade. This strategy is aimed at bolstering domestic investments but could create longer-term fiscal strain.

2. Trade, Tariffs, and Costs

The re-election of Trump also suggests a return to an assertive trade policy, with a proposal to impose high tariffs—up to 60% on Chinese goods and 10-20% on imports from other countries. This could increase costs for American consumers and potentially instigate inflation within the U.S. economy, as higher tariffs often raise prices on imported goods. Retaliatory measures by affected countries could also strain global trade, particularly impacting economies like China, Mexico, and Vietnam that rely heavily on U.S. trade.

3. Foreign Policy

Tensions with China are likely to escalate further as Trump has proposed aggressive trade and policy measures targeting Beijing. Additionally, shifts in foreign aid, notably to Ukraine, could alter the geopolitical landscape, influencing the dynamics of the Russia-Ukraine conflict. The administration’s stance on Middle Eastern policies, including oil production and diplomatic relations, may also experience shifts with implications for global energy markets.

4. Immigration Policy

Trump’s immigration platform, a core part of his campaign, emphasizes stricter immigration controls. Proposed policies include expedited deportations, an extension of the U.S.-Mexico border wall, and a push to end birthright citizenship. These measures may reduce the labour pool, particularly in industries dependent on immigrant labour, which could in turn drive up wages in sectors like agriculture and construction. Economies in Latin America may face ripple effects as remittance flows decline and deportations increase regional challenges.

5. Monetary Policy and Global Impact

Trump’s potential influence over the Federal Reserve may push for policies aligning with his domestic growth agenda, though inflation risks remain. The strong dollar, driven by Trump’s trade and monetary policies, could create ripple effects in global economies, especially those holding dollar-denominated debts. Central banks in Asia and the Gulf might face pressures to adopt tighter policies, further amplifying global inflationary trends.

Impact on the USD

Strengthening Dollar Due to Expansionary Fiscal Policies: Trump’s proposed fiscal policies, such as tax cuts and higher domestic spending, are expansionary. They would likely boost U.S. growth in the short term, leading to increased investor demand for USD-denominated assets and, consequently, a stronger dollar.Inflationary Pressures Leading to Hawkish Fed Policy: Trump’s fiscal approach could lead to higher inflation, which may push the Federal Reserve toward a hawkish stance to counterbalance rising prices. This could further strengthen the dollar as higher interest rates attract foreign investment into USD assets.Global Demand for USD Reserves: With Trump's trade restrictions and anticipated stronger USD, global demand for dollar reserves may rise as a hedge against fluctuating currency values in other economies affected by reduced U.S. trade.Impact on Equities

Trump’s expansionary policies, particularly tax cuts, are generally favourable for U.S. corporate profits and could drive stock market gains, especially in sectors reliant on domestic consumption and lower tax rates (e.g., tech and retail). However, companies dependent on imports (e.g., manufacturing, consumer goods) may face higher input costs due to tariffs.

G10 equity markets could see increased volatility as Trump’s trade restrictions affect global supply chains. 

European and Asian markets might experience downward pressure, especially in export-heavy sectors. Investors may shift capital to U.S. equities, given the pro-growth policies expected domestically.

Energy and defence sectors may benefit as Trump’s policies are expected to favour fossil fuel production and increased defence spending. Conversely, sectors like renewable energy could face challenges if environmental regulations are rolled back.

Impact on G10 Economies and Forex Market

Pressure on G10 Currencies: A stronger dollar typically puts pressure on G10 currencies like the euro (EUR), yen (JPY), and pound (GBP). Additionally, tariffs on imports from Europe and Asia would likely weaken these currencies against the dollar as export-driven economies face reduced U.S. demand.Interest Rate Adjustments Abroad: Major central banks, especially in Asia and Europe, may be forced to respond to U.S. inflation-driven rate hikes by tightening their monetary policies. For instance, the European Central Bank and the Bank of Japan might shift policies to support their currencies against a strengthening dollar.Commodity-Based G10 Economies: Currencies in commodity-dependent G10 economies, such as the Australian (AUD) and Canadian (CAD) dollars, could face additional volatility. Tariff-driven inflation in the U.S. would likely boost global commodity prices, potentially benefiting these currencies as demand for exports like oil and minerals rises, though not without heightened volatility due to trade disruptions.In summary, Trump’s victory ushers in a period of assertive fiscal, trade, and immigration policies that prioritize U.S. economic independence and influence. These initiatives may accelerate growth domestically but could simultaneously increase inflation and disrupt global economic stability. This term could redefine U.S. economic and geopolitical strategies, affecting both domestic markets and international relations significantly.

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