What Trump 2.0 means for the global economy

The promised tariffs, immigration crackdowns, and tax cuts will hit growth hard, while his stance on Ukraine may trigger global power realignments

- Janmejaya Sinha

What will the economic impact of the Donald Trump presidency be? I take five big policy areas and five economic blocks and try and do some open thinking. The five policy areas I consider are: Tariffs, immigration, tax, oil and emissions and the war in Ukraine. Global Gross Domestic Product (GDP) in 2024 is expected to be $105 trillion. The US ($29.2 trillion), the European Union, or EU ($19.4 trillion), China ($18 trillion), Japan ($4.1 trillion) and India ($3.9 trillion) make up over 70% of it. How will Trump's stated policies impact these economic blocks?

Tariff: On the campaign trail, Donald Trump said that tariff was the most beautiful word in the dictionary. He has promised a 10% tariff across the board on imports into the US and a whopping 60% tariff on goods of Chinese origin and this week announced a 25% tariff on Mexico and Canada, his largest and third largest trade partners. This will be a very consequential move and will lead to higher consumer prices in the US on goods including gas, cars, and agricultural products. It is also likely to halt the current rate cut cycle of the Federal Reserve (Fed). Tariffs like this will hurt exporting nations - China, Mexico, and Canada - and for an export-led economy like China slow down GDP growth. In addition, China has massive overcapacity in many manufacturing segments which will push it to dump goods at throwaway prices in other markets if the US gets closed.