What Trump 2.0 means for the global economy

In response to the US election results, we have adopted our “Trump Limited” scenario as our baseline view for now. Overall, a Trump presidency with potentially full Republican control of Congress has prompted us to slightly raise our near-term global GDP growth forecasts. The direct impact on global growth is likely to be limited in the short term, but masks major implications for trade and the composition of growth, as well as financial markets.

What you will learn:

• These effects could become more pronounced over time, as the full scope of President-elect Donald Trump’s intentions becomes clear. In a scenario in which the most radical aspects of his political program, notably regarding tariffs, are adopted, the impact on the rest of the world would be very significant.
• Tariffs targeted at China, the EU, Mexico and Canada will ultimately depress exports from affected sectors to the United States. But the impact on overall export volumes could be mitigated by the diversification of trade and by stronger American demand thanks to a much more flexible American budgetary policy. That said, the impact on different sectors could be significant depending on the shape of the new tariff regime.
• A key unknown is whether a clean slate raises the risk that the Trump administration will impose more extreme policy measures, such as higher and less targeted tariffs. Uncertainty over Trump’s stance on conflicts in Ukraine and the Middle East also adds to the risk of greater instability in both regions, which could have adverse consequences for regional and even global growth.

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