Tag: World News

Trump, Tariffs, BRICS, and Artificial Intelligence

In his latest pronouncements on tariffs, President Trump announced that he would enact cross-border tariffs higher than 2.5%, a figure apparently propounded by the incoming Treasury Secretary, Scott Bessent. The President told reporters aboard Air Force One that “I have in mind what it’s going to be, but I won’t be setting it yet, but it’ll be enough to protect our country”. This is yet another signal from the President that he is prepared to reshape supply chains through the introduction of tariffs in order to put “America First”.

President Trump went to tell reporters that he would be using tariffs to target specific sectors such as aluminium, copper, pharmaceuticals, semiconductors, and steel. He also advised that he may well target Mexico and Canada with tariffs on their automobile exports to the United States, the same countries that he has already targeted with tariffs of 25% on all exports to the USA (to be imposed on 1st February 2025). President Trump’s underlying belief is that tariffs on countries exporting to the United States will increase the number of jobs at home, bring factories back, and taxes on businesses and individuals will come down. 

Interestingly, the threat of tariffs on the semiconductor sector came shortly after the Chinese start-up on AI (artificial intelligence) DeepSeek* not only worried investors but erased billions from the market capitalisation of Nvidia Corp**. It appears the DeepSeek model can be as effective as other well-known AI models but at a fraction of the cost. This has translated into less data centres signing up to the likes of Nvidia, as DeepSeek can drive down the consumption of electricity, and they now challenge the assumption that the United States hold dominance in the AI market. 

*DeepSeek – Until very recently, DeepSeek was a little known Chinese start-up, but has sent shockwaves through the tech market having released an AI model named RI that can outperform leading developers from the United States such as Nvidia, OpenAI, and Google. Is reported that DeepSeek only had a USD 6 Million budget to produce RI, as opposed to the multibillion dollar budgets employed by their US counterparts.

**Nvidia – Is famous for accelerated computing to tackle challenges no-one else can and their work on AI and digital twins is transforming the world’s largest industries. Their work on AI using a GPU (graphics processing unit as opposed to a CPU – central processing unit) allows them to crunch massive amounts of data for AI much faster. When RI cast doubt on the supremacy on of US tech firms, Nvidia shed circa USD590 Billion in market value which was the biggest fall in US stock market history.

President Trump said of DeepSeek, “The release of DeepSeek should be a wake up call for our industries and that we need to be laser-focused on competing to win”. On Monday 27th January 2025, there was a major market fall-out regarding DeepSeek, with technology stocks in Europe and the United States falling by circa USD1 Trillion, with investors now questioning the spending plans of some of the biggest companies in the USA. 

On the tariffs front, experts are saying this economic tool will not just be used against those countries with just a trade surplus with the United States. Indeed, President Trump will use tariffs in other areas such as the recent spat with Colombia, where the country’s President Gustavo Petro barred and refused landing rights to two military flights from the United States carrying deported Colombians. President Trump threatened punitive tariffs of 25% on Colombian exports to the USA unless the Colombian acquiesced, and despite counter tariffs being threatened, President Petro agreed to accept migrants (including those arriving on military aircraft) without limitation, hindrance or delay. 

Elsewhere on the Trump/Tariff radar, Europe and the EU bloc has been threatened with tariffs regarding those countries with trade surpluses and those countries (just about all of them) which President Trump believes aren’t paying enough on defence. Also on the radar are the BRICS* nations, who Trump has promised to impose 100% tariffs on should they try and create a rival currency to the US Dollar. Leading politicians within the BRICS have already floated the idea of a rival currency. 

*BRICS  – is recognised as a group of emerging market countries and the acronym stands for Brazil, Russia, India, China, and South Africa. Originally the acronym was BRIC (as South Africa was not part of the founding members) and was coined in 2001 by a Goldman Sachs economist Jim O’Neill. On January 1st, 2024, Egypt, Ethiopia, Iran, and the United Arab Emirates joined BRICS, who also announced that their newest member is Saudi Arabia, but the United Kingdom has yet to put pen to paper so as yet have not officially joined

Over the last 24 years, BRICS has grown into what is effectively a world club comprising of ten member states, some of whom are major energy producers such as the United Aram Emirates, whilst others are recognised as the largest consumers amongst the emerging or developing economies. Many western commentators feel that BRICS, led by China, are an anti-western organisation and have ambitions to have their own currency moving away from global reliance on the US Dollar.

Many experts feel that President Trump will stay true to his word and invoke tariffs on many countries, including America’s allies. He is especially adamant about those countries he feels will do the United States harm and he has named Brazil, India, and China in that bracket. How far the President will go with tariffs we will have to wait and see, but with China upending the Artificial Intelligence sector, it looks like certain countries are in for a bumpy ride.

Global Energy Overview for 2025

Data released showed that 2024 saw a record uptake in renewable energy, EV’s, and other areas, however experts predict that in 2025 the demand for fossil fuels is expected to increase by more than 3 Million BOE/D*. At the same time, analysts suggest that CO2 emissions associated with the combustion of fossil fuels will reach a new record high, but will be the smallest increase since the end of the pandemic. 

*BOE/D – This is an acronym for “Barrels of oil equivalent per day”, and is a term used in the gas and oil industry as a measurement used to describe the amount of energy produced or consumed in a day. 

2025 will be a year of uncertainty as, according to experts, war zones such as Ukraine and Gaza have the potential to significantly alter energy markets. Further geo-political problems and polarisation between China and the western nations add to this uncertainty, with President Trump promising tariffs and Europe using tariffs to protect their markets, whilst China are looking for greater global influence by leveraging their position as a leader in clean technology.

There are a number of areas to be aware of in 2025 some of which are outlined below.

President Trump

During his 2024 campaign, and the build up to his winning the 2024 presidential election, it became, according to experts, obvious that the second term of President Trump (or Trump2) will follow a very different path on climate policy and energy to that of out-going President Joe Biden. First, it appears that the new administration will pull out of the Paris Agreement* and an increasingly negative attitude towards a somewhat weakened COP**.

*The Paris Agreement – Also known as the Paris Accords or the Paris Climate Accords, is a legally binding international treaty signed in 2016 and covers climate change mitigation, adaptation, and finance. There are circa 195 members of the UNFCCC ( United Nations Framework Convention on Climate Change). The United States withdrew in 2020, rejoined in 2021 and are expected to withdraw again under the new administration. The overriding goal of the agreement is to limit the global temperature increase to 1.5 degrees C and to hold the increase in global average temperature to well under 2 degrees C, both above pre-industrial levels.

**COP – The Conference of the Parties attended by governments that have signed the United Nations Framework Convention on Climate Change, (UNFCCC), a treaty which was created in 1994. The conference meets once a year and assesses global efforts to advance the key Paris Agreements aimed at limiting global warming.

President Trump and his new administration have said they will increase US oil and gas production by promoting drilling and offshore and federal land exploration. They have also expressed their desire to increase LNG (Liquid Natural Gas), making the United States a bigger player in the market. They may hope to take advantage of European markets, who will be seeking alternative suppliers to Russian gas. The implications of such a policy may well depress global energy prices, however such downward pressure could be offset by OPEC+ adjusting production quotas. Analysts also suggest that an increase in geopolitical tensions, for example with Iran prompting a reduction in Middle East supplies, could offset any increases in production from the United States, all of which could lead to prolonged price volatility.

Total energy demand: Fossil fuels vs. clean energy

Apart from various economic recessions and the Covid-19 pandemic, there has yet to be a year when green/clean energy (nuclear, hydro, solar, wind, and other renewables) supply has resulted in the reduction in the use of fossil fuels. Experts suggest that 2025 will see robust growth and above-trend in energy demands, but even the fast growth of clean energy (over 5 Million BOE/D) it is not enough to curtail the demand for fossil fuels, let alone displace that demand. It is expected that fossil fuel demand will increase by more than 3 Million BOE/D resulting in record high CO2 emissions. 

Nuclear energy

Experts advise that nuclear energy is on the up especially in the United States, and for decades has proven to be a reliable and stable source of clean energy resulting in a carbon-free provider of electricity. Many companies are trying to decarbonise and interestingly in 2024 Amazon, Microsoft, and Google all signed power supply agreements with ties to nuclear capacity to help feed their growing data centres. 

Analysts suggest that in 2025, nuclear power generation will reach unprecedented levels, with a number of countries ramping up production in Asia and Europe. The IEA (International Energy Agency) has advised that the report from “The Path to a New Era for Nuclear Energy” says the strong comeback to nuclear energy, as advised by the IEA several years ago, is well underway and 2025 will be a record year for nuclear powered generation of electricity. 

The price of Uranium has been an indicator as to how nuclear power is on the way up. Over the last five years, the price of Uranium has soared by 255% which confirms the demand for the commodity is on-going. This strategically important metal owes its current value to the increase in nuclear powered plants in the shift to green energy plus a number of global economic factors which have also had a significant bearing on its current value. The long-term outlook for Uranium is bullish as across the world there are currently 61 nuclear reactors under construction, plus a further 90 reactors are in the planning stage with in excess of 300 in the discussion phase.

Consumption from data centres and AI

Experts suggest that in 2025, as Artificial Intelligence a datacentres expand, the demand for electricity will increase to such an extent it could fundamentally effect the trajectory of global power demand. Indeed, analysts see the demand for power between 2025 and 2030 through the increasing number of  datacentres will increase by 10% – 15% per annum. In developed countries, datacentres have accounted for a circa 3% increase in power requirements, which may have taken clean power away from the grid and has possibly aided the on-going consumption of fossil fuel generated energy. 

Liquid natural gas

After two years of relative inaction and limited growth, experts see 2025 as a year of significant change in the LNG market especially as there will be an increase in liquification capacity coming out of the United States and Canada. Analysts suggest there will be an increase in capacity of circa 27 Million mt (metric tons), 90% of which will emanate from North America, with a number of facilities all expecting to ramp up production in 2025. 

Analysts advise that total global growth projections for 2025 and 2026 currently show and an increase of 2.3%. Interestingly, in Q3 2024 y/y (year-on-year) European gas imports from outside the bloc suffered a 10% decline, and if the Russian gas transit through Ukraine agreement is not renewed, in excess of 5% of their needs will have to be sourced elsewhere such as the USA and Canada. All in all, experts suggest that exports of natural gas by pipeline will increase in 2025 by 2.9 Bcf/d (billion cubic feet per day) with the bulk of the increase coming from LNG.

Coal

Analysts predict that in 2025 global demand for coal will continue to grow in spite of renewable installations hitting record highs. Demand for coal reached new records in 2023 and 2024, and as indicated above the increased call on energy from datacentres and the charging of EV’s has increased the demand on fossil fuels, despite record growth in renewables. Interestingly, some experts suggest that demand for coal in Europe and other developed economies may indeed fall, however, data released shows China represents 60% of global coal consumption and despite renewables increasing the country, can expect another record year for coal fired energy consumption. 

India is also expected to hit new highs on coal fired energy consumption and demand in the United States is expected to rebound significantly in 2025 after decades of decline. Whilst some analysts expect coal consumption to remain broadly flat the expected increase from China will have a large impact on prices though renewables will increase and begin to eat into their coal consumption. Experts in this arena expect demand to be in the region of 8.77 Billion tonnes for 2025 but all eyes will be on China to see if they reduce their coal consumption.

Jet fuel demand

Post pandemic, airline passengers figures have been increasing year on year, and experts from IATA (The International Air Transport Association) predict air passenger numbers to top five billion for the first time with the sectors revenues breaking the trillion US Dollar mark in 2025. They also added that the accumulative cost of jet fuel will be USD248 Billion, circa 5% below that of 2024 with fuel consumption rising y/y (year-on-year) to 107 billion gallons up 6%, a number in line with what airlines have been reporting over Q3 and Q4 2024. IATA suggests that data shows that overall costs for the airline industry will rise by 4% in 2025 to USD940 Billion of which jet fuel costs total 26.4% down 28.4% from 2024. 

Renewables

In the renewables arena, experts suggest that this sector will go through major transformations in 2025. New advancements in this sector come quick and fast, with new energy technology and government policies all favouring renewables. Indeed, in the United Kingdom Energy Secretary Ed Miliband looks to turn the country into a solar energy and wind turbine farm. 

Predictions from the IEA (International Energy Agency) suggests that in 2025 renewables will be responsible for providing circa one third of the worlds electricity needs, and by 2028 90% of the worlds energy requirements will come from renewables. Data released indicates that solar energy will be the dominant renewable power in a number of countries in 2025, and global capacity doubling in 2026 closely followed by wind energy.

There is a renewables gap, where demand is outstripping supply, and the race is on to fill that gap. For the first time in history, 2025 will see Asia account for 50% of the world’s electricity consumption with China consuming one third of global electricity.

OPEC and OPEC+

OPEC is a synonym for The Organisation of Petroleum Exporting Countries and was founded in Baghdad in in 1960. The original members are Iran Iraq, Kuwait, Saudi Arabia, and Venezuela, and today the current organisation has twelve member countries. OPEC control circa 35% – 38% of global supply of oil, but according to current estimates they own circa 80% of proven oil reserves. 

In late 2016, the members of OPEC signed an agreement with ten other oil producing countries to form what is known today as OPEC+. Among these countries was Russia who at the time produced 13% of total global output of oil. Today OPEC+ controls circa 48% of global production. 

Analysts suggest that 2025 could well be an unpredictable year for OPEC+, with tariff threats from President Donald Trump and the continuing war zones of Israel/Gaza and Russia/Ukraine presenting challenges to their ongoing strategies. OPEC’s forecasts for 2025 is for oil demand to reach 104.2 Million b/d (barrels per day) in 2025 and an increase to 106.6 Million b/d in 2026. Robust demand is expected to come from developing countries where data shows that consumption will almost double with Asian countries being key, and India and China being central to this growth.

OPEC+ analysts predict the price of Brent* crude oil will average USD74, down 8% from 2024, and will fall another 11% in 2026 to USD66 per barrel. OPEC sellers such as Saudi Aramco will sell their Arab Light into Europe plus or minus Brent, depending on their appetite for more or less market share.

*ICE Brent Crude – Is the benchmark used for light oil markets in Europe, Africa, and the Middle East. Saudi Arabia also use the Argus Sour Crude Index for their flagship Arab Light Crude for North America, and Oman and Dubai Indexes for East Asia. 

Conclusion

2025 will see an increase in the demand for fossil fuels despite record output from the renewables arena. The price of a barrel of oil is expected to come down unless geopolitical problems once again explode, putting upward pressure on prices. All eyes will be on renewables to see if they outperform expectations with particular eyes on the nuclear sector as it becomes more and more popular. Finally, there is the Trump.20 presidency whose policies on tariffs could, according to experts, significantly impact many sectors within the energy arena. Only time will tell how this will play out.

The Trump Effect on the Economy of the United States of America

On Monday 20th January 2025 ex-President Donald Trump will once again become President of the United States of America and a new era of Trump economics will begin. There are many differing opinions on what may happen to the American economy, but one thing seems certain: tariffs on imports to the United States are back, with China seemingly getting the brunt of this policy. Many commentators are at odds with each other as to what may happen in the short, medium and the long-term of a Trump2 presidency, so what policies will really impact the economy of the United States?

Tariffs

Many analysts and economists have said that the tariffs threatened by Donald Trump (10 – 20% on all imports apart from China which is 60%) will have the biggest impact on the US economy. In his first term, the Trump administration placed taxes and duties on imports of circa USD380 Billion, and his second administration is expected to increase tariffs even more under the “America First” policy. What is also important is that, as was seen from his first administration, the President can enact tariffs all by himself without the approval of congress.* 

*Tariff Approval – The approval of tariffs was once in the hands of congress who had the constitutional right and would require legislative action. However, many years ago, congress gave up its rights to set tariffs and today a range of laws now authorise the President when certain conditions are met to impose tariffs. Under the International Emergency Economic Powers Act of 1977, the President can invoke emergency powers to impose tariffs without having them approved by congress.

The President elect has already said that tariffs or import taxes will reduce the trade deficit of the United States, whilst at the same time raise revenue and re-shore manufacturing. Some experts predict that the President elect will implement tariffs with alacrity, however, analysts predict that as a result of import duties/tariffs, inflation will rise because the higher costs now being experienced by importers will be passed on to consumers. Janet Yellen, the United States Treasury Secretary in December 2024 has been quoted as saying that the President elect’s plans to levy broad import tariffs could derail progress in quelling inflation and raise costs for businesses and households. The Treasury Secretary went on to say that Donald Trump’s tariff plans of 60% on Chinese imports and 10% – 20% on imports from elsewhere would “raise prices significantly for American consumers and create cost pressures on companies”. 

Such concerns have been dismissed by the President elect and his cohorts as downbeat projections from senior figures on Wall Street. They pointed out that until Covid-19 and the pandemic hit, the President in his first term presided over robust growth, this despite tariffs which also did not cause inflation to spike. Indeed, the CPA* (Coalition for a Prosperous America) estimated that with the promised income tax cuts combined with a universal tariff of 10% would create circa 2.8 million jobs and would add circa USD700 Billion to economic output. 

*CPA – This is the only national non-profit organisation that exclusively represents domestic producers across the United States. They are a coalition of manufacturers, workers, farmers, and ranchers, and represent the interest of 4.1 million households. Their team includes decades of government experience in congress, the executive branch, and the private sector.

Deregulation

Historically, businesses favour deregulation and are more likely to invest under a political administration that favours such an option. Indeed, Donald Trump’s goal of removing ten regulatory rules for every new one issued will create, according to some experts, hyper deregulation, which will make a positive impact on economic growth. Analysts point to the 1990’s, where a comparative study between the United States and Europe showed that stricter regulation in Europe, and especially during a period of rapid technological information, resulted in the United States having faster growth than Europe. This particular study showed that tighter regulation deterred investment whilst a more liberal attitude towards regulation boosted investment. 

The Trump2 administration will be able to reduce quickly and efficiently what is known as “Extra Regulatory Guidance” as it does not require approval from congress. However, the removal of whole government departments and agencies would take a serious amount of time and the newly formed DOGE (Department of Governmental Efficiency)is not expected to issue their recommendations until mid 2026. Experts suggest that the prospects of deregulation will more than likely encourage a “risk on” environment in the United States, which could be especially beneficial to cryptocurrencies and financial stocks.

Tax Cuts

Analysts suggest that a Trump2 administration will probably focus on his first administration’s TCJA (Tax cuts and Jobs Act) with a view to expanding and extending this act. The reason for extending the act is that if it was allowed to expire it may well encourage a fiscal drag on US growth, so it is assumed this will have a positive impact on the economy. Corporate profits are also on the Trump2 radar with plans to cut the top rate of tax from 21% to 15%. Experts have suggested that this will be more difficult to achieve because of the current federal deficit, the pressure to raise spending on defence and other areas plus the effect extending the TCJA, which has a direct effect on voting households’ budgets. 

However, economists warn that what impact that tax cuts will have on the federal deficit as the original TCJA was not fully funded (the loss of tax revenue was not offset by other tax revenues or spending cuts). Team Trump2 however, argue that deregulation and lower taxes will eventually pay for the tax cuts (albeit indirectly) as they will ignite investment, productivity, and economic growth.

Immigration

It appears that President elect Donald Trump has two planks to his immigration policy, 1. Deporting undocumented individuals already residing in the United States and 2. Basically closing and securing the southern border of the United States. 

The incoming administration has threatened to deport between 15 and 20 million people within the United States who have no proper documentation. Experts in this area report that near-term actions will focus on the circa 1.4 million individuals that have been ordered by the courts to leave the United States. There are also a backlog of court cases accounting for circa 3.7 million individuals which will be which the new administration will hope to pass through the courts as quickly as possible. 

Many commentators agree that mass deportations could have a negative effect on the economy and inflation, with adverse effects on the service sector (experiencing acute labour shortages) and the agriculture sector where an increase in pricing could be the result of deportations. Doomsdayers suggest that such a policy could lead to stagflation, higher inflation and even a recession with a slowdown in the economy and higher wage costs. However, such speculation is dismissed by the incoming administration who feel by putting America First will allow the USA to be economically and socially on the up. 

During the Trump1 administration, securing and closing the border between Mexico  and the United States was not completed, and in the Trump2 administration the President elect will be leaning on the President of Mexico to help stop illegal crossings into America. President elect Trump has already made his feelings and intentions towards Mexico exceptionally clear. Indeed, on the very last day of campaigning the then ex-President Trump advised his supporters that the Mexican President would be the receiver of one of his first telephone calls. He said he would advise President Claudia Sheinbaum that if she did not stop the onslaught of drugs, criminals and other illegals coming into the United States, he would impose an immediate tariff of 25% on everything coming out of Mexico bound for the USA. However, a number of economists have advised that closing the border will have little impact on the economy of the United States.

Final thoughts

It is difficult to predict the future, but one thing is certain: President elect Donald Trump, with his “America First” policies, will use tariffs as a weapon to try and get his own way. Furthermore, experts suggest his policies will have a dramatic effect on the regulatory and economic landscape of the United States. Elsewhere, sustainable investment (not on the list of Trump2 priorities) emerging markets and other sectors will all feel the effect of the new administration’s policies, with broader implications for environmental risks, new challenges to global trade dynamics and increased market volatility.

 The Trump Effect on the Economies of India and Pakistan

Part 1: India

A number of experts are suggesting that President elect Donald Trump’s second term offers a mixed bag, but a general positive outlook, for the Indian economy. Experts suggest that a Trump2 presidency may well engender deeper ties with the United States, especially in the areas of technology, pharmaceuticals, and defence. However, Donald Trump’s vow of tariffs and immigration restriction suggests that Prime Minister Shri Narendra Modi’s closeness to Donald Trump may be helpful in any upcoming negotiations. 

As President elect Trump’s inauguration approaches (20th January 2025) there will be a seismic shift in economic policy. According to analysts, India will seek to reinforce strategic ties with the United States, particularly in the defence arena in the Indo-Pacific region, which is important for their security. It is hoped that increased ties in the defence area will positively impact the defence sector through increased cooperation and investment.

Donald Trump’s drumbeat of “America First” is led by tariffs, which could have a diverse effect on India’s economy, with the possibility of increased tariffs on textiles, steel products and automotive parts. Such tariffs would have a direct effect on India’s manufacturing sector and imports into the United States, especially as in 2024 data released show India having a trade surplus with America of USD35.3 Billion, which represents a red flag to the incoming administration. 

On the currency front, experts are suggesting that under a Trump2 presidency the Federal Reserve may adopt a more hawkish outlook, due to the new administration’s economic policies. Analysts believe that these policies could have a negative impact on inflation and could strengthen the US Dollar against the Rupee, increasing costs to those Indian companies paying for imports in US Dollars. Conversely, however, a weaker rupee against the dollar will have a positive impact on the export sector with companies seeing an increased profit margin.

India stands at the crossroads with the United States, and if they strategically place themselves as a trusted and stable defence and trade partner, navigating the tariffs and immigration challenges presented by Trump2, they could very well turn these challenges into avenues for partnership and growth. If the government and businesses adapt themselves to this new scenario they should hopefully minimise risks and maximise gains especially as the President elect appears to be prioritising India to counterbalance China in the Indo-Pacific.

Part 2: Pakistan

A Trump2 presidency may, according to experts, pose a number of challenges for Pakistan, especially as uncertainty abounds in the corridors of power in Islamabad. Today, it appears that Pakistan is deemed a lot less relevant in the minds of those with power in Washington. Indeed President elect Trump views Pakistan as a haven for terrorists, and in his first term severely cut economic aid to the country. China is Pakistan’s largest trading partner and if they are to enjoy any sort of friendship with the President elect, their officials will have to walk a tight line between China (Trump2 has promised 60% tariffs on China’s exports to the USA) and the United States if they need to fulfil their security and economic needs.

However, despite these misgivings the State Bank of Pakistan recently advised that their policy of quantitative easing has supported economic growth on a sustainable basis, whilst keeping external pressures and inflationary pressures in check. Their MPC (Monetary Policy Committee) recently cut their benchmark interest rate to its lowest level for two years, with the result that inflation has eased allowing the bank to boost growth. Indeed, the State Bank lowered their target rate by 200 basis points to 13% its lowest level since April 2022. 

The Governor of the State Bank of Pakistan Jameel Ahmed recently said the “the overall situation has improved on the economic front” and that the State Bank expects inflation to fall to the benchmark target range of 5% – 7%. The State Bank has cut interest rates by 900 basis points since June 2024 with data showing inflation had hit its lowest level since late 2018. 

Elsewhere, the foreign exchange reserves rose to USD12.05 Billion according to data released on 6th December 2026, mainly due to Pakistani expatriate remittances, which rose by 34% to USD14.8 Billion through five months to November 2024. Pakistan’s Finance Minister Muhammad Aurangzeb has announced that he expects total remittances to hit a record USD35 Billion for 2024 up USD5 Billion from close of business 2023. 

Pakistan almost went into default in 2023 but under guidance from the IMF (International Monetary Fund) have implemented tough economic measures and, in September 2024, received a USD7 Billion loan from MIGA (Multilateral Investment Guarantee Agency, a subsidiary of the IMF). However, Pakistan is loaded with external debt and as of September 2024 this stood at USD133.5 Billion with circa USD30 Billion to be repaid in 2025. Quotes from the finance ministry suggest that these loans will be rolled over or renewed, suggesting that Pakistan is not in a position to repay these loans.

Optimists beware. President elect Trump has already earmarked Pakistan as a harbourer of terrorists and the United States, as of September 2024, has a trade deficit with Pakistan of USD74.6 Billion, which puts the country within the realm of Donald Trump’s tariffs and their various economic ramifications.

The Trump Effect on the Economy of China

The self-proclaimed “Tariff Man” President elect (and ex-President) Donald Trump will reascend to the White House on 20th January 2025, and one of his first orders of business will be to batter China with 60% tariffs on all their export to the United States. Such tariffs, if introduced, will obliterate China/United States trade and will damage exports which has been one of the bright spots in an otherwise gloomy Chinese economy. However, many experts suggest that the Chinese government might deliberately weaken the Yuan, in order to make their exports more competitive, plus they feel that the broad budget deficit will be increased as well in response to the election of Donald Trump.

The election of ex-President Trump could not have come at a worse time for the Chinese economy, which has been struggling for a number of years. The housing market, once the driving force behind China’s economy, is currently a spent force. Analysts suggest that by close of business 31st December 2024, between completed and still under construction floor space, 2.9 billion square feet will remain unsold housing inventory. The downturn in the property market has left local governments shouldering billions in unsustainable debt, with analysts estimating the size of the debt as in the region of USD20.7 Trillion (Yuan147 Trillion), which as a comparison is just over 50% of the national debt of the United States which stands at USD36 Trillion as of November 2024. 

China has been struggling with weak domestic demand in the property sector, and this has been attributed to high youth unemployment, low pensions and wages and a social safety net which is at best chronically feeble. The net result is China’s household spending is 20% points behind the global average coming in at under 40% of Gross Domestic Product, and the government has to either increase the national debt burden or redistribute the national income in order to boost this sector. Indeed, on Friday 8th November 2024, Chinese officials gave indebted local governments a lifeline of USD1.4 Trillion (Yuan10 Trillion), however many economic commentators who are China focused said that they felt a much larger sum should have been allocated such as USD2 Trillion or above.

Therefore, with a struggling economy and masses of local government debt, it is envisioned that Trump’s administration policy of 60% tariffs on China will negatively impact a number of areas within their economy. If China feels that Donald Trump is serious, then output in the short term may well increase prior to the introduction of tariffs. It is, however, felt by many experts that there will be a long-term negative impact on the industrial activity in China. As mentioned above, the Chinese Government will use monetary and fiscal policy to support the economy (especially the construction and housing sectors), however, the decline in private investment and drastically reduced exports to the United States will outweigh any expected fiscal and monetary offsets. 

Elsewhere, experts suggest that another sector to be hit hard by tariffs will be the high-tech electronics sector, with advanced production being taken on in countries such as South Korea and Japan. Tariffs may well also restrict the flow of knowledge, thus eroding competitiveness and productivity in this sector. Furthermore, supply chains will take a hit as companies seek to reposition their operations away from China in the hope that they will avoid tariffs, with the machinery and automotive sectors being hit hard as parts are traded multiple times across border to border before final assembly commences. 

Many analysts are predicting that a Trump2 Presidency will be more destructive than the previous version, and the effect of tariffs on the USD500 Billion worth of goods will ignite a trade war worse than Trump1. It is expected that growth in China will be slower under a Trump presidency, and some analysts are predicting between 1% and 2% drop in GDP. Other experts suggest a minimal fall, as China will embrace greater stimulus and bolster manufacturing, whilst allowing the Yuan to weaken helping to offset the negative effects of Trump2. 

On the geopolitical front, President elect Trump has promised tariffs of between 150% and 200% should China blockade Taiwan, and China’s continued political and economic support for Russia has not gone down well in the west. If China approaches the European Union to increase exports to the Eurozone, Trump has promised increased tariffs to the EU’s exports to the United States. All in all, from the 20th of January 2025 (inauguration day), the US/China relationship could well have negative effects on a global scale.

The Trump Effect on the Economies of the Eurozone

President elect Donald Trump has vowed once again that in the Trump-2 presidency he will put America first and is considering tariffs on imports into the Unite States. Indeed, he recently showcased what is referred to as “Economic Statecraft”* by threatening two of the United States’ major economic partners, Canada and Mexico, with higher tariffs. In this case, tariffs are being used as an economic wall to halt/curtail the flow of illegal immigrants and cross-border drug trafficking. Furthermore, China is the biggest source of the eurozone’s imports with bilateral trade reaching Euros 739 Billion in 2023. Donald Trump is considering sticking China with 60% tariffs on all exports to the USA and may use tariffs on European countries in the eurozone as a stick to curtail imports from China. 

*Economic Statecraft – Is defined as the use of economic means to achieve foreign policy goals. 

Overview

It would appear that the slogan used by the Republicans and the then ex-President Trump in the run-up to the presidential election of “Make America Great Again”, translates into using economic statecraft to the possible economic harm and certainly disadvantage of their allies. President elect Trump has threatened tariffs on China’s exports to the USA of 60%, plus 10% -20% tariffs on all other imports. Analysts suggest that if a full trade war does indeed commence, the cost to the Eurozone in a combined total of exports is valued at circa USD36. 6 Billion in 2025 and 2026. The President elect is on record as having said the 27 nation bloc will have to “pay a big price“ for not purchasing enough American exports.

Data released by the European commission shows that in 2023, the United States imported goods from the European Union to the value of Euros503.3 Billion, representing one fifth of all non-European exports. Exports from the eurozone to the United States are led by vehicles and machinery (Euros207.6 Billion), chemicals (Euros137.4 Billion) other manufactured goods (Euros103.7 Billion), which together makes up circa 90% of the unions exports to America. Economist suggest that if tariffs are indeed put in place by the Trump administration a collapse in exports would have a detrimental effect on trade-orientated economies with the Netherlands and Germany being the likely countries to be hardest hit. 

Some analysts are even suggesting that a potential upcoming trade war could push an already sluggish Eurozone economy into a potential full blown recession. Analysts are also advising that the Euro could also fall to parity with the US Dollar (first time since late 2022) if a trade war weakens an already under pressure eurozone economy. As of November 2024, the eurozone private sector slipped into contraction, with the eurozone PMI* figures (dropped below the 50 mark) being somewhat gloomy to say the very least, and is a wake-up call for eurozone policy makers that the economy is still showing signs of weakness. 

*Eurozone PMI – This is known as the Eurozone Purchasing Manager’s Index and is a monthly survey of services and manufacturing companies in the Eurozone that measure the direction of economic trends. The PMI is a weighted average of five indices, New Orders (30%), Output (25%), Employment 20%), Suppliers Delivery Times (15%), and Stocks and Purchases (10%). This index ranges from 0 to 100 and anything above 50 indicates an increase, and anything below 50 indicates a decrease. 

In other areas, the elevation of President elect Trump to his second stint in the White House will experts believe, put pressure on the eurozone countries to spend more on defence. Apart from the trade surplus the Eurozone enjoys over the United States, what also rankles with the President elect is that the combined eurozone spending on NATO is only 1/3 of what the USA spends, and noises emanating from team Trump suggest that the United States will expect an increase in defence spending.

Indeed, just USD326 Billion was budgeted by EU governments for defence spending in 2024. Back in 2017, an increase in spending on defence equipment by 35% was budgeted by the European Union, however today only 17% or just under 50% of that figure has been achieved. Furthermore, analysts suggest that the President elect will demand that the EU countries spend at least 2 – 2 ½ %, possibly as much at 3%, of GDP on defence, and it is suggested that countries such as Spain who only spend circa 1.4% of GDP are in his bad books.

Eurozone

Donald Trump’s first presidency was marked by its transactional nature, and he ranked world leaders by his perceived weaknesses and strengths, and in some case his personal taste. The European Union has 27 states and below is an overview of the Trump effect on some of their bigger economies.

  1. Germany

In Q3 of 2024, the German economy narrowly avoided a recession, and with ex-President Donald Trump being re-elected to the White House the current outlook for the German economy is unfavourable to say the least. The incumbent Chancellor of Germany Olaf Scholz made it quite clear that he was supporting Kamala Harris’s bid for the White House, so it will come as no surprise that President elect Trump will have him and Germany in his sights when it comes to tariffs.

Experts are suggesting that the election of Donald Trump to the White House marks the start of what is possible the most difficult economic moment in the history the Federal Republic. Recently Chancellor Scholz fired his Finance Minister Christian Lindner, (leader of the Free Democratic Party, FDP) his coalition partner, and in one fell swoop bringing to an end the ruling coalition, rendering the government a lame duck. This should help Donald Trump once he is inaugurated on 20th January 2025 as German elections are slated for March later that year so the imposition of tariffs may be difficult to fight or get agreement on other issues favouring the United States.

The Germany economy could be in for a bit of a bruising come 2025. If Donald Trump does implement his tariffs, experts suggest the cost to economic output could be circa 1%, and with the German economy predicted to grow by zero percent in 2025, this is bad news all round. Furthermore, some experts are predicting that the German economy (dependent on exports) could shrink by as much as 1.5% in 2027 and 2028. 

Total exports to the United States from Germany in 2023 were valued at USD171.65 Billion, the most important of which were:

  1. Vehicles: USD36.76 Billion
  2. Machinery, Nuclear Reactors and Boilers: USD34.4 Billion
  3. Pharmaceutical Products: USD USD27.51 Billion
  4. Electronic Equipment: USD17.1 Billion
  5. Optical. Photo, Medical Apparatus, Technical: USD12. 67 Billion.

Germanys trade surplus with the United States has been rising since 2020, and data released showed it reached record levels in 2023 of €63.3 Billion. However, analysts have advised that if tariffs are levied between 10% – 20%, exports to the USA could drop by as much as 15%, and Donald Trump with his slogan “America First” will definitely have Germany in sights.

  1. France

Ironically, the re-election of Donal Trump as the 47th President of the United States of America, will strengthen French President Macron’s resolve to build a more autonomous Europe. President Macron is also perceived out of all the European leaders to have at least a half decent relationship with President elect Trump (apart from Premier Victor Orban of Hungary who is deemed to be closer). However, France is in both political and economic turmoil, with Marine Le Pen having brought down Prime Minister Barnier’s government and possibly pushing President Macron into resigning, plus a budget deficit of 6% of GDP and a Debt to GDP Ratio* of 112%.

*Debt to GDP Ratio – This is a metric that compares a country’s public debt to it Gross Domestic Product (GDP). It is a reliable indicator of a country’s ability to repay its debts by comparing what the country owes with what it produces. 

Total exports by France to the USA in 2023 was USD45.54 Billion, (just under 25% of what Germany exports to the USA) the most important of which are:

  1. Machinery Nuclear Reactors and Boilers: USD8.3 Billion
  2. Beverages Spirits and Vinegar: USD4.11 Billion (wine circa USD2.25 Billion/ Euros2.14 Billion)
  3. Pharmaceutical products: USD4.04 Billion
  4. Aircraft and Spacecraft: USD3.97 Billion.

Estimates vary, but one thing is certain, a Trump tariff imposed on French exports to the USA will be particularly damaging to the economy at this time. In 2019, the scope of tariffs were limited to France Germany and Spain, as they were the three counties involved in the Airbus consortium and was part of a dispute on aviation between the European Union and the United States. 

Elsewhere, the French wine industry is still scarred from the harsh 25% tariff imposed between October 2019 to March 2021, and producers are wondering what minefields lay ahead in the export arena to the United States. Interestingly, Trump himself is a wine producer, so the industry may well expect a tariff of a minimum of 10%. 

In light of the present economic and political debacles, plus the fact that France is spending under 2% on defence (expected to exceed 2% by 2029), President Macron can only hope he will retain sufficient authority to negotiate an equable deal with President elect Donald Trump.

  1. Spain

Experts are suggesting that a Trump administration could have both positive and negative effects on the Spanish economy. In many eurozone countries, vehicles, machinery, pharmaceutical goods expect to be at the top of a Trump administration tariff hit list. However, Spain is fearful for its olive oil industry as it may take a significant hit as it did in Donald’s Trump’s first administration. In 2017, the Trump administration levied tariffs on Spanish olives, the reason being subsidies directed at Spanish olive producers through CAP (Common Agricultural Policy) would cause harm to American producers of the same. The tariffs were between 30% and 44% on Spanish black olives being anti-subsidy and anti-dumping duties. 

Spain is the largest olive oil producer in the world and currently their largest export market is the United States, which as of 2023 accounted for 15.7% of Spain’s total olive oil exports. Over the last five years, data released shows that Spanish table olives resulted in a loss of Euros260 Million (USD273 Million) due to tariffs being imposed in President Trump’s first administration, so a second set of tariffs could be a financial disaster for the industry. Elsewhere, the three top exports from Spain to the USA are:

  1. Machinery Nuclear Reactors and Boilers: USD2.96 Billion
  2. Mineral Fuels, Oils Distillation Products: USD1.96 Billion
  3. Electrical and Electronic Equipment: USD1.82 Billion.

On the positive side, Donald Trump’s policies have encouraged capital outflow and foreign investment in foreign countries, with a stable real estate market. Spain is ideal due to its rich culture, a desirable location and attractive property prices, and this could definitely interest US investors looking to diversify their portfolios. A strengthening dollar could see a surge in US tourism with Spain already being a favoured destination for American tourists. 

Donald Trump’s mantra of ‘America First’ means he is always open to deals that favour the USA, so Spain could renegotiate trade deals, but there is one blip on the horizon apart from tariffs. Spain only spends 1.24% of GDP on defence and this, everyone knows, presses all of Trump’s buttons. Spain may well be forced to up their defence expenditure in order to gain concessions on tariffs.

  1. Hungary

Hungary is mentioned on this list as their Premier Victor Orban enjoys a cordial relationship with Donald Trump, and whilst Orban voices his approval of Russian leader President Putin, Donald Trump is certainly fascinated by him. Indeed, when many of the leaders in the European Union were condemning Orban for his pro-Russian stance Donald Trump was heaping praise on him.

However, when it comes to the economy on Hungary,  experts suggest that Trump-2 administration could spell bad news, where his economic policies could add to inflationary risks due to a weak currency (Forint). The economy of Hungary is very “open” economy and is particularly linked to the European auto sector which, in the event of tariffs, could put the Forint under renewed pressure, thereby precluding future rate cuts. Hungary also has very close ties to China, and back in April 2024 borrowed €1 Billion from Chinese Banks to finance energy and infrastructure projects. On top of that, in September 2024 Premier Orban announced that Chinese firms had pledged €9 Million of investment in Hungary.

How the China link will play out with President elect Donald Trump, who is an obvious supporter of Orban, time will only tell. There are many imponderables with Hungary, but due to their personal relationships these problems may well be sorted out on a person to person basis.       

Final thoughts

There are, as mentioned previously, 27 member states in the European Union, and their President Ursula von der Leyen, who is in her second term, must keep the union unified in the face of the policies which will be emanating from the White House post 20th January 2025. The President may well find this difficult because, as in President elect Donald Trump’s first administration, many Eurozone countries beat a path to the door of the US administration hoping to find favour with President Trump and do their own bilateral deals. It is felt the same will happen the second time around. 

Whilst the European Commission has sole responsibility for trade deals for all members, there are smaller options that countries can negotiate with Washington. Furthermore, Trump may pick out Germany and France for special tariff consideration as they are the two biggest economies in the eurozone (and therefore have the biggest influence within the union), plus they both have their own current economic and political problems. Imposing or threatening to impose tariffs on these two countries could be the economic dark cloud that brings the EU in line regarding defence spending. The leaders of the European Union, and their prime ministers and presidents, will be waiting with bated breath as to what President Trump will decide come his ascension to the White House for the second time.

The Trump Effect on the UK and the EU

An amazing political comeback by ex-President Donald Trump will see him re-enter the White House on Monday 20th January 2025, and if he sticks to his promise that he will impose tariffs on many of the imports into the United States, the cost estimate by experts to the United Kingdom will be billions of pounds. The fact that Labour sent key electioneering staff to help the Democratic campaign, and Foreign Secretary Lammy’s tirade against President elect Trump, calling him  “Neo Nazi Sociopath”, may well impact on future trade negotiations. 

Figures released by analysts suggest that the United Kingdom could be hit to the tune of £20 Billion should President elect Trump impose tariffs of 10 to 20% on the United Kingdom’s exports to the United States. After the European Union, the United States is Britain’s largest trading partner and, up to the year ending 30th June 2024, the UK delivered exports to the United States to the value of GBP188.2 Billion. The hardest sector to be hit by tariffs will be pharmaceuticals and medical goods (largest export sector to the United States), followed by the automobile sector (cars and parts) and aviation parts such as jet engines. It must also be remembered that the whisky producers in Scotland are highly dependent on their exports to the United States.

If tariffs are introduced, figures released by the Centre for Economics and Business Research, suggest Britain’s economic output could be trimmed by just under 1% by the end of his presidency in 2023. Furthermore, figures released show a GDP growth in Q3 in the United Kingdom slowing to circa 0.1% and further headwinds from tariffs could severely impact economic growth. Data released by NIESR (National Institute of Economic and Social Research), show that a trade war between the United States and the United Kingdom could reduce growth in the UK by 0.7% in President elect Trump’s first year and 0.5% in his second year.

If GDP does fall in line with the above estimates from the NIESR this will make life difficult for Chancellor Reeves to meet her “Stability Rule”* which will raise the prospects of further taxation, a policy the current government carries out with great gusto and relish. Furthermore, President elect Trump’s protectionist policies may well according to experts put upward pressure on the cost of borrowing. Experts suggest that under President Trump the impact on bond yields could negatively affect UK borrowing costs, which in turn could dampen activity putting further strain on the UK’s public finances. 

* Chancellor’s Stability Rule – The requirement is that the current budget (tax revenues minus day to day spending) be in surplus by 2029/20230.

President elect Trump, in his campaign America First slogan, will continue his threats to pull out of NATO if Europe and Great Britain do not increase their defence spending to 2.5% of GDP, with a rumoured 3% of GDP apparently going to be tabled once he is in the White House. The new Defense Secretary Peter Hegseth is not a big supporter of the Ukraine and has branded NATO members “As a group of self-righteous and impotent nations using America as an emergency number”. The United Kingdom may well have to adjust their defence spending upwards if that’s what it takes to keep the United States supporting Ukraine, otherwise Prime Minister Starmer’s vow to back Ukraine will mean nothing.

Elsewhere, the Labour government is hoping for a more constructive relationship with China. Indeed, Foreign Secretary Lammy, who is notoriously anti-Trump, has already visited China confirming that the new government will have greater cooperation on issues such as trade, A1 and climate. However, it is obvious to all that President elect Trump’s views on China are diametrically opposed to those of Foreign Secretary Lammy and the Labour government. If the United Kingdom are looking to build trade deals with China whilst President elect Trump is looking to hit China with 60% tariffs, it will be interesting to see how far the UK/China labour policy pans out. 

On the climate front, the energy secretary David Miliband has announced that Great Britain is on its way to becoming a green energy “superpower”. He has promised there will be billions invested in the United Kingdom’s green energy programmes, and he has lifted a ban on new onshore turbine wind farms and has given his approval on to build a mass of solar energy farms. In the meantime, President elect Trump has moved totally in the opposite direction, and whilst labour is announcing a break from oil and gas, in his first presidency Trump took the United States out of the Paris Agreement (climate agreements) and will more than likely repeal any of the outgoing President’s green policies that did not make it over the line. If the United Kingdom is looking for any help from the United States in their green policies, Mr Miliband has taken a leaf out of Lammy’s book and called the President elect a moron, making it unlikely that they will come to any kind of agreement.

Donald Trump will be inaugurated as President of the United States on Monday 20th January 2025 and from then on the possibility of tariffs becomes a reality for the Labour government. However, there is the potential to avoid tariffs, which according to experts is undesirable for the government and that is a free trade agreement. In his first term as President, Trump pursued this policy much more proactively than the current incumbent of the White House. Such an agreement would make UK exports cheaper than those hit with tariffs, but the big sticking point remains food standards and it will be up to the Labour government to decide what is best for the United Kingdom.

The Trump Effect on Latin American Economies

With Donald Trump decisively beat Kamala Harris in the race for the White House, analysts and experts alike suggest that there will be far reaching economic consequences for the rest of the world. It is suggested that if the President elect only enacts a small portion of his election promises, such as financial demands on NATO partners, deregulation and increased oil drilling and tariffs, the negative effect on inflation, government finances, interest rates, and economic growth will be felt by countries across the world. In Congress, the Republicans have already secured the Upper House (the Senate), and if predictions are correct they could secure the Lower House (House of Representatives), which will make it easier for the President Elect to push through his policies.

One of Donald Trump’s key economic pledges is tariffs, which includes a 10% to 20% tariff on all imports into the United States except for China who will be hit with a 60% tariff on all exports to the Unites States. Experts advise that of all the policies, the “Trump Tariff” policy is likely to have the largest global impact as they lower growth for exporters, have a negative effect on public finances and inhibit global trade. The President elect said during his campaign for the White House “Tariff” is his favourite word and is “the most beautiful word in the dictionary”. Interestingly, and supporting his own stand on tariff’s, Trump took the unusual step of threatening John Deere, (the agricultural manufacturer) with a 200% tariff if they moved production to Mexico. 

Below is an overview by experts on selected countries in Latin America as to what effects the economic policies of President elect Trump will have on their economies.

Latin America

The re-election of ex-President Donald Trump may well bring important and significant challenges to Latin America. The President elect has already stated he will place a 60% tariff on all Chinese exports to the United States, so how will he respond to China’s growing influence in the region? Many South American countries find it difficult to overlook China’s direct economic commitments, so the Trump administration may well have to prioritize regional economic policy.

  1. Brazil

On Wednesday 6th November 2024, when it was announced the Donald Trump would be re-entering the White House, the Brazilian finance minister Mr Fernando Haddad said, “The world woke up on Wednesday more tense than it was yesterday”. Indeed, such remarks were echoed to an extent in other parts of the government where certain factions were advocating a delay in planned public spending cuts, due to the expected ripple effects of a Trump administrations effect on global financial markets. 

However, many analysts in Brazil feel that a Trump administration will create a global liquidity vacuum, so there must be immediate implementation of fiscal measures (spending reductions of circa R$40 – R$60 Billion (USD7 – USD10.5 Billion) ). Furthermore the protectionist policies of the incoming President including tariffs could well jeopardise Brazilian industrial exports to the United States. China and Brazil have vey close economic ties and if the protectionist policies of the incoming administration slow down the Chinese economy, the agribusiness sector of Brazil could find itself in trouble. Some experts advocate that Trumps policies could keep inflation high in the United States and will therefore keep interest rates high in both countries, which may well lead to less direct foreign investment in Brazil. 

  1. Mexico

President elect Trump has already made his feelings and intentions towards Mexico exceptionally clear. At a rally In North Carolina, on the very last day of campaigning Donald Trump made a precise policy decision to his supporters. He announced that Mexico’s President Claudia Sheinbaum would be the receiver of one of his first telephone calls in which he would advise that if she did not stop the onslaught of drugs and criminals coming into the United States, he would impose an immediate tariff of 25% on everything coming out of Mexico bound for the United States. 

Indeed, former foreign minister Jorge Castaneda said that a Trump administration was a nightmare scenario for Mexico as the President elect’s victory was partly due to his standing on and one of his chief promises to end illegal immigration across the southern border of the United States. Early indications of looming problems for Mexico was when the presidential race was called for Trump the Peso hit its lowest level against the US Dollar since 2022 at 20.8 to the dollar. 

Furthermore, Mexico for some years has been enjoying a “Nearshoring bubble” and as experts line up to say that reshoring and protectionism is back, several companies in America have paused planned investments in Mexico. This includes the President elects close friend and confidant Elon Musk, who owns Tesla. It is well known that the President elect hates trade surpluses and Mexico in 2023 had a trade surplus of USD152 Billion, the second largest deficit after China. 

The Mexican economy is driven almost exclusively trade with 83% of its exports going to the USA. Some economists are warning that even a small increase in tariffs could lead to a rise in unemployment, a rise in poverty, reducing Mexico’s long-term economic growth and prompting more Mexican nationals to migrate to the United States. Analysts point to the fact that few world economies are more tightly bound than Mexico and the United States with some experts predicting that that under a worst-case scenario the economy of Mexico could fall into recession, the Peso will depreciate, and inflation will rise. 

  1. Argentina

President Javier Milei was the first foreign leader to meet President elect Donald Trump after his stunning victory in the 2024 United States presidential election. President Milei also said of President elect Trumps victory “that the forces of heaven were on our side”. Indeed, following the election of ex-President Trump the Argentinian financial markets enjoyed a significant upturn stemming from the anticipated closeness of President elect Trump and President Milei. Experts suggest that as an ally of the current Argentinian administration, President elect Trump, as he did in his first term, he will promote US investment in Argentina’s oil sector.

Further signs of optimism after a Trump victory was on 6th November 2024 where Argentinian US Dollar denominated bonds enjoyed gains in early trading plus the country’s risk index dropped to its lowest level since 2019 at 872 basis points. This index is indicative of what premium investors demand to hold local bonds compared to equivalent US debt and the S&P Merval, which is Argentina’s main stock index rose by more than 3%. 

The last time Argentina had a right wing government (President Macri 2015 – 2019) the country enjoyed a close relationship with the Trump administration, who were instrumental in securing an IMF loan in 2018 of USD44 Billion. Many commentators see a Trump administration as beneficial to Argentina, which has already been good for Argentinian assets, but long-term implications, as always, remain uncertain.

  1. Colombia

A big problem for the Trump administration will be Colombia, where President Gustavo Petro and his administration have been openly critical of the United States’ role in global affairs. President Petro was one of the last Latin American leaders to congratulate Donald Trump on his re-elevation to the White House. In fact, he only acknowledged the ex-Presidents victory on X (formerly twitter). He further indicated his feelings against America’s pro-Israel stance and their blockage of Venezuela, showing ideological affinity with Cuba.

The Columbian’s President stand on Gaza and Israel has deepened an already strained relationship with Washington, and he furthermore severed diplomatic ties with Israel, accusing them of Genocide. Columbia also represents the largest source of cocaine entering America, and President Petro has not been as enthusiastic regarding the eradication of its production. Donald Trump has a zero tolerance drugs agenda, and the United States is the largest donor of foreign aid to Colombia which maybe under threat in the future.

The Colombian government are presently trying to complete a deal with the United States for a USD40 Billion climate change investment plan, and if they cannot secure this agreement before the 20th January 2025, experts suggest that any negotiations with the Trump administration would come with substantial caveats, if indeed an agreement could be reached. An alternative could be China, but experts agree that would only increase the current tensions, and the outlook for Columbia’s economy maybe bleak unless President Petro comes to some agreements with President elect Trump’s administration.

  1. Peru

China is Peru’s main trading partner, and if President elect Donald Trump carries out his threats regarding a 60% tariff on all China’s exports to the United States, this could have an indirect negative effect on the economy. The intended tariff on China’s exports to America would mean a potential slowdown in the country’s economy which in turn would translate into lower prices and falling demand for Peru’s exports of copper, iron ore and other raw goods.

Data released by Peru’s Foreign Trade and Tourism Ministry show that between January and August 2024, China accounted for USD16.7 Billion or 36% of Peru’s exports of which total mining exports accounted for USD12 Billion or just under 75%. 

Although Peru export quite a high volume of products to the United States, these are products they are happy not to protect, and according to data released by experts with projections up to 2029 under a Trump administration exports could only fall by 1%. There are also opportunities for Peru as, while China may be economically harmed by tariffs, Peru could step in with more exports such as textiles and safety glass for cars. It should also be noted that China’s President Xi recently inaugurated a USD1.3 Billion mega port (Chancay) in Peru which experts suggest will become South America’s biggest shipping hub. 

  1. Paraguay

Regional experts on South American countries suggest that the election of ex-President Donald Trump opens the door for closer relations between Paraguay and the United States. At a time when a number of South American countries are aligning themselves more with China, Paraguay can present itself as a strong ally to the United States. Under the current President Santiago Pena, Paraguay has probably the most effective cabinet and administration in its history.

In contrast to a number of other South American countries, Paraguay maintains diplomatic relations with Taiwan, has been an ally of Ukraine and a vocal supporter of Israel in their current war in Gaza. Such a political stance should be music to the ears of President elect Trump, and it is therefore essential for economic growth that Paraguay catch the eye of the President elect at a very early stage. Paraguay is uniquely situated between Santiago, Sao Paulo, and Buenos Aires, giving the country the opportunity to become a regional hub. 

There is also considerable room for economic growth between the United States and Paraguay: where in 2023 bilateral trade was worth USD3 Billion, whereas Columbia’s was circa USD39 Billion. Paraguay also enjoys a number of sources of green energy, and the country’s ability to produce substantial amounts of green hydrogen through harnessing electricity from their two hydroelectric dams (Itaipu and Yacyreta). Global demand for green hydrogen is expected to dramatically increase in the coming years driven by international commitments to reduce carbon emissions. Paraguay appears to be well placed to benefit economically from a Trump presidency, hopefully President Pena, whilst a recognised ally of the United States, can become a close friend of President elect Donald Trump, thereby enhancing closer economic ties.

Final thoughts

There are some experts suggesting that the Trump victory actually presents a unique opportunity for the countries of Latin America. As many countries are confronted by political instability, climate change, and economic challenges, the leaders should follow mechanisms of a collaborative nature to create one voice. They could then adopt strategies for instance that could see them acting as a regional bloc for trade purposes, help address the crisis in Venezuela, attack climate change and organised crime together. Whilst a Trump presidency often creates a polarising effect, this time he might bring the countries of Latin America together.

The Future of America’s Economy: Donald Trump vs. Kamala Harris

Experts and analysts from many walks of life have been mulling over what effect the two presidential candidates (Trump/Harris) will have on the economy of the United States. Both candidates have very different visions of an economy that they will build if/when they get elected to the office of President of the United States of America. Below are some of the differing policy decisions the candidates will make as they try to shape America’s future.

1. Trade policy

Trump

During his first and only term as President of the United States Donald Trump ushered in a new era of trade policy for America by introducing tariffs. Once again, he has promised to put his “America First” policy back on track with greater fervour than before. Donald Trump has informed the voters that he will introduce a baseline tariff of 20% on all imports with a 60% tariff on any imports from China. He has further promised massive new tariffs on those countries that abandon the US Dollar and all imports of cars from Mexico. 

Trump has said that these new tariffs will fund everything from child care to tax cuts, but experts are sceptical as they suggest that the tariffs won’t come close to creating the revenue this policy requires. Indeed, such experts suggest that the best case scenario is that tariff revenue could be between circa USD 200 – USD 400 Billion per year, but these numbers would drop as trade realigns. Furthermore, Trump has promised voters that he will revoke China’s “Most Favoured Nation” status, along with banning Chinese investors from buying US real estate or companies, and he has vowed to keep United States Steel Corp in US Ownership, blocking a potential sale to the Japanese.

Harris

Kamala Harris has issued very little in the terms of trade policy but has vowed no major departure from President Biden’s current trade policies, which have retained all of the Trump’s administration’s tariffs, plus adding a couple of new ones. She has also agreed with Trump, vowing to keep US Steel Corp in US ownership, and has gone on to say she will make available tax credits to help businesses in the United States compete with China. However, she has warned voters that Donald Trump’s promised increase in tariffs for all imports would increase the costs for consumers and argues that it is nothing more than a National Sales Tax. Experts suggest that Harris is expected to expand and enhance the United States domestic technological and economic strength by promoting resilient and diversified global supply chains. Political commentators suggest that voters will be swayed by the fact that Vice President Harris’s trade stance is not that of Donald Trump. 

2. Immigration

Trump

Donald Trump has announced he will complete the wall on the Mexican US border which he started in his first term, whilst deporting millions of undocumented migrants. His party, the GOP (Grand Old Party), are running on a platform where they promise to end “a tidal wave of illegal aliens, deadly drugs, and migrant crime.” 

Harris

At the start of her term Vice President Harris was mandated to tackle immigration, however that has sadly failed as there has been a surge of migrants across the border. Indeed, under the Biden/Harris administration there has been a surge in border crossings culminating in December 2023 when in excess of 300,000 migrants crossed into the United States. However, in June 2024 these numbers finally fell after asylum restrictions came into effect. Kamala Harris has said very little on immigration policy, but has pledged to re-introduce legislation that will clamp down on border crossings. 

3. Housing

Trump

Former president Trump has proposed that if he wins the White House he will repurpose some federal land to build new homes, whilst promising to reduce the cost of homebuilding by severely reducing the amount of red tape. He also affirms that his policy on immigration will have the effect of reducing the purchase price of homes, making them much more affordable.

Harris

Like Donald Trump, Vice President Harris has also proposed repurposing some federal land to build new homes. Her platform also wants to help first time buyers with down payments on homes, proposing support of up to USD25,000. Furthermore, she has also proposed a fund with USD40 Billion to support innovations in home building whilst offering tax incentives to those builders who work on starter homes. Elsewhere, she is suggesting she will target certain landlords with new measures because they raise rents by utilising price-setting tools. 

There have been some negative comments by related market experts who advise that the United States has two problems in this area, lack of housing and affordability. They acknowledge that Harris’s proposals are to tackle both problems at the same time, however they feel her policies on housing will make purchases less affordable. Their reasons are fairly straightforward, as subsidies given to new home buyers will inevitably push up demand as building new homes will take time to deliver. As such, this will push the prices up and make it an increased pay-day for sellers. 

4. Inflation

Trump

One of Donald Trump’s major promises is to keep inflation low, and energy makes up a key part of this promise. Indeed, he argues that offering new land for drilling and tax relief on gas and oil producers, reducing the time it takes to obtain approvals for permits, licences, and pipelines, will boost oil and gas production and will help bring costs down. However, sceptics point out that unless the Republicans control congress it would be difficult to pass such legislation.

Harris

A lot of Vice President Harris’s rhetoric is all about middle-class families and lowering their costs. In the health care arena she is proposing a USD35 limit on insulin payments and on prescription drugs out of pocket costs will have an annual cap of USD2,000. Regarding groceries, Harris has proposed a federal ban on price gouging, whilst introducing new penalties for those companies who infringe, violate or flout pricing rules. These proposals have been greeted somewhat sceptically by certain economists and analysts. 

Experts note that since March 2020 food prices have risen by 25% making it more difficult for households to live. Data released show that over the past few years profit margins at grocery stores were fairly flat, meaning that these shops were raising prices in face of supply chain disruptions and rising costs, not gouging customers. 

To conclude

A number of experts and analysts suggest that, although Vice President Harris and former President Donald Trump come from vastly different places, both sides agree to deploying tariffs, stopping takeovers of US firms by foreign predators and above all running the largest deficits in the history of the United States, even when the economy is flourishing. As far as the election goes, once again America is deeply divided, it will be the swing states that call this election, and with only a short time to go, it is anybody’s guess. 

Will the US Dollar Continue to Decline?

According to data supplied by Bloomberg’s Dollar Spot Index, the US Dollar has fallen just under 1% in September 2024, and is currently in the longest monthly losing streak since January 2023. Experts suggest that currency traders feel the US Dollar is in for more losses after the Federal Reserve cut interest rates by 50 basis points on 18th September, with analysts suggesting that sentiment is still bearish, with traders having already taken into account the impact of lower cost of borrowing. 

Since late June 2024, financial markets were getting more confident that the Federal Reserve would soon begin to cut interest rates and as a result the US Dollar Index has fallen by circa 3.6%. A downward trend that has continued since and since 18th September. With the United States election becoming imminent and the debate surrounding the rate cut intensifying, there are some strategists who are advising their clients to completely avoid the US Dollar. 

Data shows that markets and investors are engaging in more cross-currency exposure and giving the greenback a miss, so profits from trades such as buying GBP against the New Zealand Dollar or shorting the Swiss Franc against the Japanese Yen will be regardless of the outcome of the US election, or any fiscal policy announced by the Federal Reserve impacting the US Dollar.  Interestingly, data released by the BIS (Bank for International Settlements) reveals that on average the US Dollar accounts for one side of 88% of trades in a market valued at USD7.5 Trillion per day, so for the greenback to be avoided shows the uncertainty surrounding the currency.

Experts suggest that the US Dollar could well remain weak as the financial markets hunt for clues in economic data which might suggest the pace at which the Federal Reserve will cut interest rates. A number of analysts agree on a 25 (1/4 of 1%) basis points cut in November, however in the swaps markets experts are suggesting that there is a better than 50% chance of a bigger cut in rates. Therefore, the swaps markets feels that future interest rate movements are downwards, so fixed rate notes are betting on a bigger rate cut than 25 basis points.


However, as of 30th September, the Federal Reserve Chairman Jerome Powell adopted a more hawkish tone on the economy leaving financial markets, indicating that interest rates will only be cut by 25 basis points in November’s meeting. The dollar index rose .42% on the news, but as always the Federal Reserve’s decisions will be data driven, so it is still open season on whether the US Dollar continues its slide or not. Furthermore, analysts suggest that a Harris presidency will promote a stronger dollar whilst a Trump presidency will promote a weaker dollar.