With Trump set to return to the White House for a second term, stakeholders across the globe are waiting to determine the impact his administration will have on markets and policy.
Trump fought his 2024 election campaign with much of the fierce, resolute messaging that defined his 2016 campaign. Business, tariffs, China, and climate change underpinned the discourse in the buildup to the election, with Trump making the themes of his governing agenda clear. As the world prepares for his second term to start in January 2025, domestic and international markets react to what a Trump presidency might look like – namely, the sectors that stand to benefit, the uncertainty in domestic markets, the countries that will be most impacted by changes to US foreign policy, and where Trump’s victory leaves the climate crisis.
Some domestic businesses respond well
The tech sector looks to be a key beneficiary of the upcoming Trump presidency. Early backing from Peter Thiel and Elon Musk signalled that a Trump administration would be supportive of big business interests. In turn, banking institutions, along with private equity and private credit, are gearing up for an increase in dealmaking within the sector over the next four years.
Importantly, Trump’s deregulatory stance is expected to propel the tech industry forward when he takes office. Big tech firms were among key beneficiaries of the surge in stock markets following his election victory, with artificial intelligence (AI) chipmaker Nvidia’s shares reaching a record high. Trump’s pledge to repeal Joe Biden’s executive order on AI – which establishes standards for safety and security – will remove red tape for the sector and likely support further growth.
Similar commitments to cryptocurrency deregulation saw the market react strongly to Trump’s victory, with Bitcoin reaching its highest-ever valuation on election day at US$89,000[1]. And given Elon Musk– who has long been a proponent of decentralised cryptocurrencies – is set to play a key role in the new administration, crypto bulls will likely stand to benefit under Trump’s leadership.
Meanwhile, having already spoken out against the Biden administration’s bid to break up Google, the president-elect is expected to dial back many of the antitrust measures enacted by Biden. That said, given the “Magnificent 7” tech stocks represent close to half of NASDAQ’s total market cap and are currently investing around USD 65 million per quarter in their tech infrastructure, Trump is not expected to completely abandon efforts to reduce their dominance.
Elsewhere, the auto manufacturing industry reacted positively to Trump’s promise to usher in a “manufacturing renaissance”. Yet while proposed widespread tariffs are intended to protect domestic manufacturers against low-cost imports, economists have warned that accompanying inflationary risk could undermine any benefits.
Overall, the stock market responded well to news of Trump’s victory, implying his proposals support the interests of domestic business. His Tax Cuts and Jobs Act – which saw corporate tax rates fall from 25% to a record low of 21% during his first term – will likely be extended and even expanded, with messaging on his campaign trail suggesting a further cut to as low as 15%.
Uncertain path ahead for US financial markets
While certain sectors have reacted well to Trump’s victory, aspects of his domestic policy pose a threat to the US’ economic performance. Immigration was a crucial component of Trump’s campaign rhetoric, with the incoming president promising to oversee the largest mass deportation in US history. Given much of the US’ recent growth can be attributed to a surge in the labour force (underpinned by both legal and illegal immigration), a reversal of this process would likely depress wages and growth.
Forecasts suggest that Trump’s proposals are unrealistic – particularly given the federal and local government support required. However, businesses must be wary. Economists predict deficit growth of US$7.5tn over the next 10 years, along with inflationary pressure resulting from proposed tariff increases and deportation efforts.
The Federal Reserve’s reaction echoes domestic uncertainty. The Fed is monitoring inflationary indicators to determine interest rates over the next year, and while the expectation is for continued cuts throughout 2025, some indicators are hotter than optimal and there are mixed signals from the labour market.
The direction for asset allocation will account for multiple scenarios, ranging from a soft landing to accelerated growth. While US bond equities still show the best fundamentals, given inflationary risk remains high, the key focus for the upcoming year will be reducing duration risk. Elsewhere, given the uncertainty surrounding the extent to which Trump will implement his proposed policies, we will likely see greater asset diversification, with increased investment in cyclical commodities such as gold to account for increased macroeconomic risk.
Trump’s tariff agenda
Tariffs are set to define Trump’s approach to foreign policy. China has been the target of the incoming president’s escalating attacks since 2016, and his 2024 election campaign saw a continuation of his anti-China rhetoric. The Biden administration, though less aggressive in language, maintained a protectionist stance, with tariffs imposed on Chinese capital imports – notably electric vehicles, solar cells and steel. Trump’s second term will likely see an escalation in tensions between the two nations, with the president-elect proposing a 10% additional tariff on all Chinese imports when he takes office on January 20th.
Mexico and Canada have also come under fire, with Trump promising to impose a 25% tariff on all imports from the two countries. The United States-Mexico-Canada free trade agreement is set for review in 2026, and the US’ neighbours are preparing for a hostile reception. Given how intertwined these economies are, (50% of food sold in the US is imported from Mexico, for example), following through on these promises could have a devastating impact, as well as add to domestic inflationary risk.
That said, the likelihood is that Trump’s campaign commitments will exceed the policies of his presidency. During his first term, Trump’s Treasury Secretary, Steven Mnuchin, moderated some of his more radical campaign promises. While Trump’s cabinet already includes several tariff proponents, the influence of the Wall Street contingent of Trump’s administration and his allies in big business means that there will be an effort to reduce inflationary pressure associated with tariffs on consumer goods.
The global ripple effect
Naturally, US tariff policy will likely have a significant ripple affect that will be felt across the world. China, Mexico and Canada have so far been the targets of Trump’s tariff agenda, but other countries are wary.
Vietnam is already nervous about Trump’s rhetoric around tariffs, having built a strong trade surplus in the wake of the US’ deteriorating relationship with China of just over US$100bn, as of 2023. Almost 30% of the country’s exports now go to the US, and a blanket 20% tariff could see Vietnam’s GDP growth fall from 5% to 1%.[2] More broadly, Southeast Asia has boosted its manufacturing capacity, with Malaysia now a strong producer of chips and AI data centres, which could see it stand to benefit from changing trade flows.
That said, China’s response to US tariffs may be to expand exports into local regions. If China chooses to flood Southeast Asian countries with cheap goods, it could undermine domestic production in these regions and derail the ability of emerging Asian markets to grow their trade relationship with the US.
India’s position looks more favourable. With Trump engaging in competition with China over tech, India is well-placed to forge a more positive relationship with the US. Prime Minister Narendra Modi has been supportive of business, and investors are paying greater attention. Furthermore, while the country trails Southeast Asia regarding foreign direct investment, Indian corporates have low debt levels across the board and demographic trends are strong.
Trump’s proposed trade tariff policy will also likely significantly impact the FX market if it is enacted. With tariffs proposed across all jurisdictions, currencies most affected by tariffs—namely the Chinese Yuan, Mexican Peso, and Euro—will likely be subject to increased volatility in favour of the dollar. A short-term depreciation of the Yuan is likely to absorb the shock of tariffs and maintain a degree of price competitiveness with global competitors. Meanwhile, China will look to increase protectionism while targeting lending to sectors most affected. Fiscal policy will likely be looser, and the central bank will leverage monetary policy to help avoid excessive depreciation.
Is the green revolution at risk?
Trump’s second term poses a significant threat to climate action. He remains outspoken in his dismissal of the climate emergency. His pledge to “drill, baby, drill” underscores his desire to deregulate the oil industry and promote large-scale domestic oil extraction. His appointment of Chris Wright, CEO of fracking services company Liberty Energy, as Energy Secretary, and Lee Zeldin – who has frequently voted against environmental regulation – as administrator of the Environmental Protection Agency, emphasises the climate scepticism and pro-deregulation of the new administration.
Trump has also criticised investment in Biden’s Inflation Reduction Act (IRA) and has vowed to terminate spending. Carbon experts have suggested that his presidency could increase US carbon emissions by 4bn tonnes equivalent (GtCO2e) by 2030.[3] There are concerns that, alongside large-scale action such as rolling back legislation and pulling out of global treaties, Trump will also look to defund climate research behind the scenes.
Trump's cabinet so far comprises loyal figures who will help him enact his intended policy goals, and with the Republican Party having emerged victorious in both the House and Senate, Trump will have a much stronger mandate than in his first term. Tariffs look set to define his presidency, and US trading partners across the world anxiously await further details about his policy agenda.
