A Donald Trump victory in the 2024 U.S. presidential election could shake the global economy in many ways. If he wins, expect changes in trade, economic growth, and financial stability.

Trump’s approach to trade could lead to big changes. He wants to slap a 10% tariff on all U.S. imports, up from the current 2%. This means everything coming into the U.S. would cost more. 

The tariffs might cause other countries to retaliate with their own tariffs, leading to trade wars. Remember the last time Trump did this? It strained relations with China and disrupted global supply chains.

Higher tariffs would also lead to higher prices for imported goods. This could slow down consumer spending and hurt the economy. 

The reduction in global trade could disrupt international supply chains and lead to job losses in export-driven industries.

Economic growth and stability

Trump’s economic policies could have some mixed effects on growth. On the one hand, tax cuts and increased spending on defense and entitlements could boost U.S. growth in the short term. 

But on the other, these policies could also increase the national debt and budget deficits, creating long-term economic instability.

The International Monetary Fund (IMF) has warned that drastic changes in economic policy due to elections could cause damaging cross-border effects. 

A Trump presidency might slow global growth due to increased trade tensions and policy uncertainty. According to Goldman Sachs, Trump’s re-election could reduce the Eurozone’s GDP by 1% and slightly increase inflation by 0.1%.

Inflation and monetary policy

Trump’s policies could also lead to higher inflation. The combination of tariffs, fiscal stimulus, and supply chain disruptions might push inflation rates up in the U.S. and worldwide. 

There are concerns that Trump might replace the Federal Reserve Chair with someone more aligned with his views, which would threaten the Fed’s independence. 

Higher inflation might force central banks to keep interest rates high, affecting global borrowing costs and economic growth.

Trump has said he prefers a weaker dollar to boost U.S. exports. But, during global instability, the dollar often strengthens as a safe-haven currency. 

His policies could push countries to reduce their reliance on the dollar in international transactions.

A Trump presidency could heighten geopolitical tensions, impacting the economy. U.S.-China relations might worsen, affecting trade, technology transfer, and investments. 

Financial markets and investor sentiment

Trump’s policies could affect financial markets big time. The uncertainty surrounding his policies could lead to increased market volatility. Increased deficit spending could pressure bond yields, leading to higher global borrowing costs.

Trump has also promised to end the “persecution” of the crypto community, pledging to sack the SEC chair and stop the crackdown on Bitcoin.

He criticized the Biden administration’s oversight of cryptocurrency, calling it “repression.” Trump could shake up the crypto market and attract support from crypto enthusiasts.

In a recent interview, he said that he would let Federal Reserve Chair Jay Powell finish his term if he was doing the right thing, though there are reports that his team is drafting proposals to erode the Fed’s independence.

While tough talk on inflation might appeal to voters, messing with central bank independence could risk monetary stability and credibility.