| The Bulletin, January 2025 |
| Donald Trump’s return to the White House and his commitment to ‘America first’ policies have reignited debates on the future of global trade, geopolitics and investment strategies. This edition of the Bulletin examines the implications of Trump’s policies, exploring how they could reshape global dynamics in an already fragile macroeconomic environment. |
While the core elements of Trump’s economic strategy remain familiar – protectionism, de-regulation and a hardline stance on immigration – the timing and execution of these policies could produce vastly different outcomes for the US economy. These elements will have both growth-constraining and growth-boosting impacts, but they may not immediately derail the US economy.
However, outside the US, the picture is less rosy, with structural fragilities such as lack of productivity growth, high public debt and slowing growth in major economies. Trump’s policies could further exacerbate existing vulnerabilities, particularly in regions reliant on stable trade systems.
Trade remains central to the new administration’s economic agenda with renewed tensions between the US and China almost inevitable. But Beijing might be better prepared to respond this time around. From Beijing’s point of view, the past four years have seen an increase in deglobalisation, so the marginal impact of any hike in tariffs is far lower compared to 2016.
Even so, the ripple effects of trade tensions are expected to be felt globally. These may reshape geopolitical alignment, spurring closer intra-regional financial co-operation, especially among Brics countries as they look to reduce dependence on the US. However, relations between large Latin American economies such as Argentina and the US might become warmer.
While trade fragmentation might be cause for pessimism, financial markets more broadly have reacted with cautious optimism. Further, local currency markets in emerging markets are expected to face challenges, but the strength of the dollar and tariff-driven disruptions make hard currency bonds more appealing to investors.
As the global economy braces for the shocks of Trump’s ‘America first’ policies, the interplay between protectionism, geopolitical tensions and financial market shifts will define the coming years. Policy-makers and investors alike must navigate these uncertainties with agility, balancing risks while seizing new opportunities.
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