What Donald Trump's election victory means for the global economy – DW – November 6, 2024

As the world wakes up after Election Day in the US, it looks ahead to another Donald Trump presidency.

Republicans have also taken control of the US Senate, which will make it easier for Trump to put his economic policy ideas into action. Although the president has a number of direct executive powers, the final hurdle will be control of the House of Representatives.

Trump's promise of high tariffs

A Trump victory would put a new, harsh turn on the global economy.

Many of his economic ideas are similar to those of his first term. This time, however, they are more sophisticated and he has more experience and determination to see them through.

He has promised tariffs of 10% or 20% on all goods imported into the U.S. and even higher tariffs of 60% on goods made in China.

At the same time, he has promised to move production home, cut taxes and deport millions of irregular immigrants.

Although some of these promises may seem extreme, they were enough to convince many voters struggling with higher food and housing prices that they would be better off supporting Trump economically.

How are global markets reacting?

Trump's policies will have a major impact on the US economy, but will also have a major impact on the entire world.

Before the election, companies around the world had already factored in a Democratic or Republican victory and made contingency plans.

Since a Republican election victory now appears likely, the markets are reacting.

Stock markets in Asia, the first to open after the election, had a mixed reaction to a Trump victory. Japan's Nikkei and Australia's S&P/ASX 200 rose. While the Hang Seng Index in Hong Kong declined. Stock markets in mainland China were barely moving and European markets have been subdued so far.

US markets greeted Trump's victory with both optimism and concern. Stocks rose sharply in early trading Wednesday, with futures on the S&P 500 index rising more than 2% on its pro-business agenda. No such rise was seen in the bond market, as 10-year U.S. Treasury bonds sold off and yields rose toward 4.5% on expectations that a growing deficit under Trump would force the government to increase its borrowing to repay.

Bitcoin hits an all-time high

Trump has promised to make America the “crypto capital of the planet” by stopping regulation and becoming more open to innovation. His support for cryptocurrencies has given hope to the industry in the US.

Bitcoin, the most popular cryptocurrency, temporarily reached a record high of over 75,000 US dollars (69,800 euros) on Wednesday.

Many cryptocurrency advocates like Elon Musk want to see him elected. Some individuals and crypto companies have donated millions to Super PACs to support candidates of their choice.

The dominance of the US dollar

While Bitcoin rose sharply, some other currencies did not perform as well against the US dollar

The European Union and countries like China, Japan and Mexico are rightly concerned about tariffs.

On Wednesday, many of their currencies lost value against the rising US dollar. The Mexican peso posted its biggest fall in three months as it is particularly vulnerable to new US tariffs as the country's largest trading partner.

A more expensive dollar will generally make U.S. goods more expensive for others. This also makes global commodities priced in dollars, such as oil, more expensive for buyers who pay in other currencies.

European fears and opportunities

In addition to trade difficulties and tariffs, some Eastern European countries fear that Trump could weaken or even undermine America's important support for NATO. This fear, coupled with worries about the future of the war in Ukraine and who will pay for it, has led to the devaluation of numerous Eastern European currencies, such as the Hungarian forint.

To appease Trump, Europe may need to increase its defense spending in general and its support for Ukraine in particular. In addition, many of Trump's actions could lead to inflation with roots in the United States and harm the ability of other countries to borrow money.

Taken together, such measures would have “particularly negative consequences for Mexico, but also for the eurozone and are closely related to the Central and Eastern European region,” Piotr Matys, senior foreign exchange analyst at In Touch Capital Markets, told the Bloomberg news agency.

“Donald Trump's second term in office will be a greater challenge for German and European industry than his first,” warned Thilo Brodtmann, head of the Federal Association of German Mechanical and Plant Engineering, in a statement.

“We especially need to take his tariff announcements seriously,” Brodtmann said, adding that tariffs would weigh on global trade and could force China and European countries to further expand their own economic strengths.

Edited by: Ashutosh Pandey