Global takeaways of the US election

Summary

In this report, we examine some thematic and global takeaways from the U.S. election. We view a second Trump administration—and more specifically his proposed tariff policies—as a catalyst for further deglobalization and global economic fragmentation. Tariffs could also act as an inflection point for China to approach stimulus efforts differently, while the nature of U.S. involvement in foreign affairs also has scope to take a new path relative to the Biden administration Lastly, we maintain our view for a stronger dollar over the medium term, and believe any attempts from Trump to manufacture dollar weakness will prove to be futile.

Global takeaways of the US election

Deglobalization and fragmentation are likely to gather momentum in a Trump 2.0 administration. In our view, Trump winning the White House and having a largely unilateral ability to implement tariffs and shift U.S. trade policy in a more protectionist direction is yet another deglobalization force. During his first administration and over the course of his latest campaign, Trump has been unwavering in his commitment to tariffs. Time will tell how tariff policy ultimately evolves, but as our U.S. economists note in a post-election report, Trump's tariff threats should be taken seriously. Global trade cohesion has suffered since the Global Financial Crisis and deteriorated further as a result of COVID. Erecting new barriers to trade will place additional pressure on the interconnectedness of the global economy, which can have longer-term negative implications for global economic growth, especially if retaliatory tariffs are imposed on the United States. Fragmentation (i.e. countries choosing to strategically align with either the U.S. or China) is a product of deglobalization, and as U.S. trade and broader economic policy becomes more uncertain, strategic alignments could shift back toward China. We observed a noticeable shift in alignment patterns toward China during Trump's first term, driven by countries opting for stronger trade relations with China, participating in China's foreign investment programs and voting in unison with China on geopolitical issues at the United Nations General Assembly. With U.S. trade policy likely to turn more contentious and inward-looking, countries around the world could look to strengthen economic and geopolitical ties with China.

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