Thoughts from the Divide: Which Way Is Up?

Trying to understand the Global Economic Impacts of Trump’s Second Term. So far, he has signed more executive orders on his first day than the last ten presidents combined. As of this writing in the middle of the Friday trading day, US markets initially seem impressed, with the S&P reaching an all-time high earlier this week and the Nasdaq 100 and Solactive 200 both higher. There is a bit of pullback today, but we are higher for the week overall. And US markets aren’t alone, Japanese and European equities have had their best performance this year. Maybe Japan and Europe aren’t going to be affected by the Trump tariffs? Last time we looked, they made a whole lot of automobiles, but what do we know?
BY JON WEBB

Thoughts from the Divide: Which Way Is Up?

MI2 Partners

Jan 24, 2025

While the US tries to stay warm during a Polar Vortex or survive during a new round of devastating CA fires, the entire world is trying to understand the Global Economic Impacts of Trump’s Second Term. At this point, it is anyone’s guess.

So far, he has signed more executive orders on his first day than the last ten presidents combined. As of this writing in the middle of the Friday trading day, US markets initially seem impressed, with the S&P reaching an all-time high earlier this week and the Nasdaq 100 and Solactive 200 both higher. There is a bit of pullback today, but we are higher for the week overall. And US markets aren’t alone, Japanese and European equities have had their best performance this year. Maybe Japan and Europe aren’t going to be affected by the Trump tariffs? Last time we looked, they made a whole lot of automobiles, but what do we know?

The Global Economic Impacts of Trump’s Second Term

Donald Trump is back, and so is the chaos. The second coming of “The Donald” promises a four-year spectacle of bold claims, political drama, and economic shakeups. His agenda, predictably, is as polarizing as ever—a whirlwind of protectionism, deregulation, and populist promises that will undoubtedly leave global markets feeling dazed and confused. But hey, at least it won’t be boring.

  1. Protectionism and International Trade Tensions

Trump’s trade policies are back and as subtle as a bull in a china shop. His plans to slap 10–20% tariffs broadly—and an eye-popping 60% on China—could blow up global supply chains, inflate costs, and leave trade-dependent economies scrambling. While he may claim these tariffs are mere leverage, retaliation from trade partners is all but guaranteed. Brace yourself for:

  • Heightened trade conflicts: Expect retaliatory tariffs and some good old-fashioned diplomatic side-eye from China and the EU.
  • Regional trade pacts: As the U.S. throws its weight around, other nations might cozy up without Uncle Sam, making agreements like the CPTPP more attractive than ever.
  1. Impact on Emerging Markets

Emerging markets are in for a wild ride. Trump’s economic circus might temporarily boost U.S. demand, but his fiscal shenanigans and interest-rate drama could send shockwaves through developing economies. The key risks?

  • Capital flight: A stronger dollar might lure investments away, leaving emerging markets to pick up the pieces of their devalued currencies.
  • Commodity price volatility: Relaxed sanctions on Venezuela? Sure, it might shake up oil markets, but don’t expect a smooth transition.
  1. Energy and Climate Policy

Climate change? Never heard of it. Trump’s fossil fuel frenzy and disdain for renewable energy initiatives are set to cause ripples in global energy markets. The fallout?

  • Disruption of green initiatives: Other nations may decide, “If the U.S. isn’t playing ball, why should we?
  • Market shifts: With increased U.S. oil production, energy-exporting countries may find themselves in a pricing freefall.
  1. Geopolitical Alliances and Economic Decoupling

Trump’s foreign policy plays out like a reality TV drama—think tariffs on allies, demands for NATO to step it up, and possibly buying Greenland. These antics could fray alliances and fuel economic decoupling:

  • Formation of alternative economic blocs: Snubbed nations might create their own club, leaving the U.S. out in the cold.
  • Reduced U.S. influence: Trust is hard to rebuild after a Trump-sized wrecking ball.
  1. Domestic Deregulation and Global Spillovers

Domestically, Trump’s love affair with deregulation might give Wall Street a sugar rush, but the long-term risks are enough to make any economist wince:

  • Financial market instability: Loosening the reins on financial markets? What could possibly go wrong? (Hint: 2008.)
  • Technology competition: Dialing back restrictions on tech exports could heat up the global competition, especially with China eager to capitalize.

Conclusion

Welcome to the Trump economy, where unpredictability is the only certainty. His “America First” approach may create some headline-grabbing deals, but it risks leaving behind a trail of instability and broken alliances. Governments and markets around the world better buckle up—this ride is just getting started.

https://www.gocomics.com/calvinandhobbes/2025/01/24

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