Charging the Global Economy: Trump Win Reverberates Around the World

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(Bloomberg) – Donald Trump’s victory in the US presidential election has world leaders preparing for how his next administration will shape the global economy.

In China, factories are ramping up shipments ahead of the Christmas holidays and possibly in anticipation of worsening trade tensions. Emerging markets were hit hard as the dollar and the US rallied. And back in the US, economists predict Trump’s proposals – especially on costs – will boost inflation and suppress growth.

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Speaking after the Federal Reserve cut interest rates for the quarter, Chairman Jerome Powell said Trump’s re-election “will have no impact” on the central bank’s policy decisions in the near term. The Bank of England has cut borrowing costs for the second time this year.

China offered indebted local governments a lifeline of 10 billion yuan ($1.4 trillion) but stopped short of disclosing the new stimulus, which leaves room for a possible trade war when Trump takes office next year.

Here are some charts from Bloomberg this week on the latest developments in the global economy, markets and world politics:

In the US

The former president and the next president have promised to increase taxes on all US imports and to deport the largest number of immigrants in history. He also wants a say in Federal Reserve policy. Many economists think this platform will add to higher inflation and slower growth ahead.

Trump’s dramatic and decisive election victory has already led to a downward spiral in financial markets around the world. Powell will need to assure global investors that the Fed can control the impact of Trump’s second term – especially if it is accompanied by a sweep of the Republican Congress – that already changes expectations on the path of monetary policy.

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In Asia

Chinese officials revealed details of a local debt repayment plan “hidden” from public balance sheets at a press conference in Beijing on Friday. Although policymakers have not announced measures to stimulate domestic demand, Finance Minister Lan Fo’an has promised “very strong” monetary policy next year, indicating that stronger measures may come after Trump’s inauguration in January.

China’s export growth rose in October to its fastest pace since July 2022, extending a monthly boost in an economy that could be threatened by Trump’s re-election and his tariff threats. Last year, Chinese companies exported 500 billion worth of goods to America, accounting for 15% of the value of all exports.

When Trump started a trade war with China in 2018, Beijing found itself on the back foot and unsure how to respond. This time President Xi Jinping is better prepared for the war, as he has a lot to lose.

In Europe

The BOE’s approach to downsizing has been complicated both by Chancellor of the Exchequer Rachel Reeves’ Oct. 30 and the election of Donald Trump as US president. The UK now plans to spend £70 billion ($90.4 billion) a year on luxury spending, almost half of which is financed by borrowing. Trump threatens higher tariffs in a new global trade war.

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Traders are looking at the possibility of more bond sales in Germany after the government’s top bailout was fired, leading some in the market to consider a new administration that could tolerate higher debt.

A third of Britain’s official “shopping basket” has gone into debt, providing another green light for the BOE to cut interest rates. The share of things that are cheaper than a year ago is the highest since the spring of 2021, before the disruption of the pandemic and the Russian invasion of Ukraine sent prices down, according to a Bloomberg analysis of the nearly 220 goods and services that make up the Consumer Price Index.

Emerging Markets

Inflation reached the top of the central bank’s tolerance range in Brazil and was faster than expected in Chile as rising energy costs gave policymakers another reason to worry. Interest rate futures rose in both nations as investors bet policymakers would take a hawkish turn.

Achieving distressed debt with high-yielding funds still has potential to work in countries as diverse as Argentina and Ukraine, according to a top-performing hedge fund in the asset class.

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The world

Vietnam is among the most trade-dependent countries in the world – exports make up 85% of its economy and the US is its largest market. Vietnam had an estimated $100 billion surplus with the US last year, the fourth largest imbalance with the US after China, Mexico and Canada, and growing. Sometimes this may put Vietnam in Trump’s eyes.

In addition to the Fed and BOE, policymakers in Sweden, Pakistan, the Czech Republic, Peru, and Gulf nations including Saudi Arabia, the United Arab Emirates and Qatar also cut back. Australia, Malaysia, Poland, Norway, Serbia and Romania are held. Brazil’s central bank has redoubled the pace of tightening and spelled out more clearly the need for cost-cutting to help control the inflation target.

—Courtesy of Philip Aldrick, Andrew Atkinson, John Boudreau, Rebecca Choong Wilkins, Alice Gledhill, Selcuk Gokoluk, James Hirai, John Liu, Matthew Malinowski, James Mayger, Colum Murphy, Tom Rees, Andrew Rosati, Catarina Saraiva, Fran Wang and Carolina Wilson .

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