Trump 2.0: How His Presidency Will Impact Tariffs, Stocks, Global Trade, And Immigration Policies

As the global equity markets prepare for the possibility of "Trump 2.0," analysts are highlighting potential challenges and opportunities that may arise with the return of Donald Trump as the 47th President of the United States. Investors are particularly concerned about the expanded use of tariffs, which could have far-reaching effects on trade, inflation, and asset classes like crypto and immigration.

Trump has already made clear his intention to impose higher tariffs, reigniting fears of a trade war, especially with China. In addition to tariffs, issues such as the H1-B visa and cryptocurrency, particularly Bitcoin, are also expected to be key areas of focus during his presidency, as per a Business Standard report.

Trump 2.0: Impact Of Tariffs On Global Markets

One of the most discussed concerns is the potential for a 10 per cent universal tariff. This could have broad repercussions for global equity markets. Nearly 20 per cent of the cost of goods sold by S&P 500 companies are imported, meaning a 10 per cent tariff could reduce their earnings per share (EPS) by three to five per cent. Markets in Latin America, Europe (excluding the United Kingdom), and North Asia are expected to be particularly vulnerable.

Sectors within the US, such as materials, autos, and semiconductors, could stand to benefit from tariffs. However, consumer sectors in the US may face significant challenges due to the high import content from China, potentially leading to a price impact of between -6 and -8 per cent. In China, tech hardware and equipment, along with banks, could experience the most significant impacts due to slower loan growth and deteriorating asset quality.

India, however, is expected to be largely unaffected by the tariff hike, with 95 per cent of analysts believing it will have no impact on Indian stocks. As a result, India may be seen as a relative outperformer in the global market.

Trump 2.0: Inflation And Monetary Policy

Experts from various financial institutions have mixed views on how the new Trump administration will shape economic policies. According to the same report, Julius Baer notes that despite unprecedented uncertainty, capital markets are anticipating a relatively stable macroeconomic environment. The uncertainty surrounding Trump's economic agenda and the potential for reflationary policies, including higher growth and inflation, may limit the scope for further monetary policy easing by the Federal Reserve, which is expected to keep the federal funds target rate at 4.5 per cent through 2025.

At the same time, analysts from Jefferies point out the contradictory nature of Trump's policy proposals, which could have inflationary effects. They also note the growing importance of cryptocurrencies, particularly Bitcoin, which may soon enter the mainstream under Trump's administration. However, they caution that Bitcoin should be viewed as a digital alternative to gold, rather than a complete substitute.

Trump 2.0: China And US Trade Relations

Trump's stance on tariffs is likely to continue, with Nomura predicting that tariffs on China and other trade partners will be raised gradually over 2025. This could place upward pressure on inflation starting in the second quarter of 2025. There is also a risk that tariffs could be implemented more rapidly than expected, leading to an earlier inflationary shock.

In response to the tariff threat, Chinese companies may seek to shift production to the US, potentially softening the impact of tariffs on exports. Additionally, a slowdown in new immigrant arrivals is anticipated as a result of stricter immigration policies, the same report concluded.