What Trump 2.0 means for the world? - Holocene Impact Capital

Introduction

As president elect Donald Trump prepares to become the 47^th President of the United States, reactions from global leaders and markets have been as fast as they have been flattering. Most people anticipate a presidency dominated by a focus on domestic priorities at the expense of international engagement which will reshape policies, alliances, and the world at large.

This piece will examine 4 trends in depth:

Global diplomacy and international reactions,
Economic policy and reaction of the market,
Climate policy,
US domestic policy and economic impact.

Global diplomacy and international reactions

In the immediate aftermath of Trump’s election victory, world leaders extended their warm congratulations, signalling a willingness to re-engage with his administration. Israeli Prime Minister Benjamin Netanyahu and Ukrainian President Volodymyr Zelenskyy voiced support early on, a reflection of the importance the US will play in supporting the on-going conflicts in Ukraine and the Middle East.

European leaders expressed scepticism, particularly over Trump’s commitment to NATO. Whereas Asian allies such as Japan and South Korea look to ensure a deepening of security cooperation with the US amid potential policy shifts on North Korea and China.

Concerning China, it’s anyone’s guess. While Trump has taken to favoring a hawkish tone with the world’s second largest economy, there may come a time where Trump’s love of making a deal leads to an agreement being struck at the cost of sacrificing other commitments such as alliances and commitments within the Asian Pacific Region.

Key diplomatic reactions in numbers:

2% of GDP: NATO defence spending target for member countries, a threshold Trump has urged allies to meet or exceed. Expect Canada to get a lot of criticism as it spends 1.34% of GDP on defence.

Economic policy and market reactions

Trump’s presidency brings economic populism and protectionism to the forefront, with proposed policies expected to impact both U.S. and global markets. He plans to extend the $1.5 trillion tax cuts from 2017, with the goal of stimulating business growth through deregulation and a 10% universal tariff on imports. His proposed immigration policies include deportations targeting undocumented workers, which could disrupt sectors reliant on immigrant labour, such as agriculture and construction. Combined, there are deep concerns of renewed inflationary pressures in the US economy which could impact the rest of the world as well.

For an understanding of which countries would be most at risk to a potential 10% universal tariff, please refer to the map below.

Market responses and projections:

$75,000: Bitcoin’s new high, up nearly 8% following Trump’s victory, as cryptocurrency investors anticipate favorable regulatory policies.
10% tariff: Proposed universal US import tariff, and possibly 60% on Chinese goods.
15%: Proposed new corporate tax rate, down from 21%, potentially increasing S&P 500 earnings by 4% in the near term.

Climate policy: reversals and global implications

In a sharp departure from recent U.S. climate commitments, Trump aims to withdraw from the Paris Agreement, roll back environmental regulations, and support the fossil fuel industry. His administration’s proposed repeals include the $369 billion in clean energy funding outlined in the Inflation Reduction Act. Trump also plans to dismantle 100+ environmental regulations, including emission standards and renewable energy subsidies. Experts warn that these policy reversals could result in increased U.S. emissions, impacting the global goal to limit warming to 1.5–2°C as agreed under the Paris framework.

Implications of climate policy reversals:

RIP ESG: This may be the end of the umbrella term ESG where E (Environment) is separated from Social and Governance factors.

Domestic policy and economic impact

Domestically, Trump’s policies are anticipated to accelerate deregulation and reduce federal oversight, with a focus on economic growth through tax cuts, tariffs, and streamlined federal agencies. Fiscal analysts project that Trump’s policy mix could add $7.75 trillion to the U.S. national debt over the next decade, a figure that has raised concerns about long-term fiscal health and funding for government programs.

Domestic policy outcomes in numbers:

1-2%: Potential rise in consumer prices due to potential tariffs.
$7.75 trillion: Projected addition to the national debt over the next decade due to combined effects of tax cuts and increased spending.
7 million: Targeted deportations of undocumented immigrants, with potential economic impacts on agriculture and construction industries.

Conclusions

Trump’s second term represents a potential recalibration of the U.S. role on the global stage. With a mix of economic populism, isolationist foreign policy, and regulatory rollbacks, this administration’s trajectory may alter international stability, economic conditions, and climate commitments. As the world watches closely, the interplay between economic strategy, international alliances, and climate policy will be pivotal in shaping the global order in the coming years and decades.