The News
Global finance chiefs and investors are increasingly hedging for the possibility of former US President Donald Trump winning back the White House — with concerns also growing over what a second Trump administration would mean for the world’s economy.
Finance leaders meeting at the recent International Monetary Fund and World Bank meetings in Washington expressed more uncertainty over a potential Trump presidency, Reuters reported, with many fearing the possibility of an escalating global trade war. Trump has proposed policies that would add trillions to the US debt, hike tariffs on imports, and reverse course on policies to curb climate change.
SIGNALS
Central bankers fear uncertainty, trade war under Trump
At the IMF and World Bank meetings in Washington, Turkey’s finance minister worried that a higher US deficit under a second Trump presidency could both cause long-term interest rates to rise and strengthen the US dollar, consequences that “don’t serve emerging markets well.” South Africa’s central bank governor said the prospect of a tit-for-tat global trade war could halt the current trend of easing inflation, putting pressure on reserve banks. “Everyone seemed to worry about the high uncertainty on who would become the next president,” the Bank of Japan’s governor said, while another central banker told Reuters: “It’s starting to feel like Trump is going to win.”
Asian economies could be hardest hit
Of all the world’s regions, Asia specifically “will be hit the hardest” by a Trump win, a Singapore-based investment banker told Nikkei Asia, because a tariff hike would disproportionately impact the region’s export-oriented economies, like China. The Japanese yen is seen as particularly vulnerable because of the gap in interest rates between the US and Japan. Investors see a Kamala Harris victory, by contrast, as a continuation of the status quo, and predict stocks will likely react positively, at least in the short-term. Many in China’s financial sector, however, favor Trump, according to an ING economist. Speaking to Chinese business clients, Trump “was seen as simpler in prioritizing economic and trade-related objectives, and may be less restrictive in other areas against China,” he said.
Trump embraces unpredictability as policy
The uncertainty surrounding the effect of Trump’s economic plans mirrors his broader foreign policy of unpredictability. America’s allies — and adversaries — believe that Trump “wants to keep them guessing over his plans,” the Financial Times wrote, and his camp is leaning in: “Predictability is a terrible thing,” said Ric Grenell, a Trump loyalist who could serve in a second administration. “Trump is not predictable and we Americans like it.” In some sectors, Trump’s plans are more predictable: He would likely put more pressure on trading partners who have surpluses with the US, especially Germany and France. “I think it’s going to be rocky for them,” a former Trump White House official said.