Tariffs on US imports: Trump has proposed a 10% tariff on all US imports, and 60% on Chinesemade products; a 25% tariff on all imports from Mexico is also likely. Sectors exposed to tariff changes, such as semiconductors, autos and clean energy, will likely be volatile. Higher US inflation: Likely because of tariffs; possible headache for Federal Reserve boss Jerome Powell as he continues his battle to bring inflation to heel
Stronger dollar: Investors expect Trump policies to lead to higher inflation and growth than would have been the case under Harris, meaning the Fed would need to keep rates high to prevent the economy from overheating, which in turn would be bullish for the dollar
Emerging markets: Apart from tariffs, VP Vance has suggested a 10% remittance tax. Moreover, a strong dollar could mean flight of money out of some EMs; dollar funding will be costly
Deregulation: Softer line on crypto regulation expected; less regulation for bigger corporations; likely rollback of environmental regulation which may benefit US oil and drilling, and coal mining.
Smooth sailing for rollout of internationally agreed (Basel III) proposals to make banks more resilient
Cut in US taxes: His plan to cut the corporate tax rate to 15% from 21% would raise S&P 500 earnings by about 4%, Goldman Sachs estimates
Action against illegals: Trump recaptured the White House vowing a vast immigration crackdown. His backers expect Trump to turn his campaign promise of mass deportations into a reality
Climate fight on back burner: Fear of a potential dismantling of US support for renewables and climate policy. Trump had vowed to scrap offshore wind projects through an executive order on his first day in office and to roll back climate regulations implemented under Biden.
10-YEAR TREASURY YIELDS
Yields, meanwhile, rise to their highest levels since July
This comes as bond investors bet a Trump presidency could usher in tax cuts and tariff hikes that boost the deficit & inflation
The 10-year Treasury yield jumps to a fourmonth high of around 4.47%
Impact On
China: Tariff shock will be difficult to absorb because of the current Chinese housing crisis and growing debt pile of local governments. In his 1st term, tariff level on Chinese products was 7.5% to 25%, much lower than the 60% proposed now
Iran: Analysts warn Trump may pressure Iran through stricter sanctions on the country’s oil industry and empower Israel to strike its nuclear sites and conduct assassinations. In his 1st term, Trump reimposed sanctions on Iran after he withdrew from a 2015 nuclear pact between Iran and world powers that had curtailed Tehran’s nuclear programme in exchange for economic benefits. Iranian currency dropped to an alltime low of 700,000 rials/$ on the free market
Europe: Europe will have to bear the blow of increased defence costs if Trump reduces support for NATO and Ukraine war; US now is expected to change tack on Ukraine. On the economic front, tariffs loom on European exports to the US in light of Trump’s warning shortly before his US presidential victory that the 27-nation bloc will have to “pay a big price” for not buying enough American exports. In the previous term, Trump had slapped tariffs on EU steel and aluminum exports
Ukraine: Trump has indicated he will push through a peace deal that could force Kyiv to offer some concessions. He has already made known his opposition to the scale of US military and financial support for Kyiv