Impact of Trump's Election on the Global Economy: A Profound Change with Immediate Effect

The recent election of Donald Trump as President of the United States signals a profound change with economic consequences likely to be felt worldwide. Initial congratulations from international heads of state have already been conveyed, while Trump announced on Wednesday that he has received a 'powerful mandate' to govern. Should Trump implement even a fraction of his campaign promises — from higher trade tariffs to deregulation, increased oil production, and heightened demands on the United States' NATO partners — global financial markets, inflation, economic growth, and interest rates could come under significant pressure. With control of the Senate and gains in the House of Representatives, Trump's political initiatives could more easily be enshrined in law and key appointments more readily executed. Erik Nielsen, chief economist at UniCredit, describes Trump's fiscal promises as 'seriously concerning' — both for the US economy and global financial markets. Trump is not sufficiently appreciated, yet he poses a significant threat to financial stability in the US and globally. A central element of his policy includes high import tariffs, such as a blanket 10% tariff on imports from all foreign countries and a 60% tariff on imports from China. These could hinder global trade dynamics and simultaneously strain global growth rates and public finances. Such measures are expected to raise inflation in the US, potentially forcing the Federal Reserve to tighten its monetary policy. The International Monetary Fund already describes global growth as weak and could be forced to downgrade its global GDP growth projection of 3.2% for the coming year. Higher import costs are typically passed on to customers, potentially leading to increased inflation in the US. This would compel the Fed to keep interest rates higher for longer or even raise them again. According to the bipartisan Committee for a Responsible Federal Budget, Trump's increased spending and tax commitments could raise US debt by $7.75 trillion by 2035. Such a scenario of higher inflationary pressure could weigh on domestic demand, as restrictive monetary policy measures would be needed to protect growth, as Anis Bensaidani from BNP Paribas points out.