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Summary
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This report looks at how the U.S. election might affect the world. A second Trump presidency, especially his plans for tariffs (taxes on imported goods), could lead to less global cooperation and more economic separation between countries. This might cause China to change how it boosts its economy. The U.S. might also change how it deals with other countries. We still think the U.S. dollar will get stronger in the coming years, and we don't believe Trump can make it weaker even if he tries.

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Trump's second presidency could speed up deglobalization and economic separation

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So the dust has settled, and Trump is heading back to the White House for a second term in office, having swept all seven of the so-called battleground states. Based on his own statements, he's very likely to put new tariffs in place and make U.S. trade policies more protective of American interests. This could have the effect of further weakening global trade, which has already suffered since the 2008 financial crisis and COVID-19 pandemic. New trade barriers could hurt the global economy in the long run, especially if other countries put tariffs on U.S. goods in response. As U.S. trade policies become less predictable, some countries might choose to align more closely with China instead.

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Trump's tariff threats might change how China stimulates its economy‍

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China's leaders are meeting soon to discuss economic plans. They might change their usual approach of supporting real estate and manufacturing. With Trump planning to raise tariffs on Chinese goods, China might decide that boosting manufacturing isn't helpful anymore. Trump's global tariff could also make it harder for China to avoid U.S. tariffs by sending goods through other countries like Mexico. This could hurt China's export sector, which has been doing well this year. China might start focusing more on increasing domestic demand and consumer spending instead of exports and manufacturing. However, China's leaders are cautious about offering too much economic support, as the government already has a lot of debt.

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U.S. foreign policy might become more deal-focused

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‍With conflicts happening around the world in 2024, Trump is likely to keep the U.S. involved in global affairs, but in a different way to the current administration. He might try to negotiate peace deals, like ending the conflict between Russia and Ukraine, with Trump claiming to solve the conflict on day one of his second term. Indeed, he has already spoken to Zelensky, with Elon Musk sitting in on the call. In the Middle East, Trump points to his past success with the Abraham Accords (agreements between Israel and some Arab countries) and says he supports Israel strongly. He's also questioned the U.S. commitment to NATO and defending Taiwan unless these allies pay more for protection. This suggests that U.S. involvement in world affairs might become more about making deals that benefit the U.S. financially.

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Trump won't be able to make the U.S. dollar weaker

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We expect the U.S. dollar to stay strong in 2025 and 2026. Trump's policies, like extending tax cuts and raising tariffs, could lead to higher inflation in the U.S. This might cause the Federal Reserve (the U.S. central bank) to lower interest rates more slowly than expected. While this could slow U.S. economic growth, it might also keep the dollar strong compared to other currencies. Even if Trump wants a weaker dollar, he can't make it happen without the Federal Reserve's cooperation, which is unlikely. The Federal Reserve is independent and probably won't try to weaken the dollar just because the President wants it to.

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