Charting the Global Economy: Trump Win Reverberates Around the World

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(Bloomberg) — Donald Trump’s decisive victory in the U.S. presidential election has world leaders already preparing for how his next administration will shape the global economy.

In China, factories increased shipments ahead of the Christmas holiday, most likely in anticipation of worsening trade tensions. Emerging markets were hit hard as the dollar and US yields rose. Back in the United States, economists expect Trump’s proposals – especially on tariffs – to stoke inflation and curb growth.

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Speaking after the Federal Reserve cut interest rates by a quarter point, 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 also cut borrowing costs for the second time this year.

China has given indebted local governments a 10 trillion yuan ($1.4 trillion) lifeline but stopped short of unleashing new stimulus, leaving room to respond to a potential trade war when Trump takes office next year.

Here are some charts featured on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:

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The former president and soon-to-be new president has promised escalation of tariffs on all US imports and the largest mass deportation of immigrants in history. He also wants to have a say in Federal Reserve policy. Many economists believe the platform leads to higher inflation and slower growth in the future.

Trump’s stunning and decisive election victory has already led to a frenzied repricing in financial markets around the world. Powell will need to reassure global investors that the Fed is capable of managing the impact of a second Trump term – especially if it is accompanied by a Republican sweep of Congress – which actually changes expectations about the course of monetary policy.

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Asia

Chinese officials revealed details of a program to refinance “hidden” domestic debt on public budgets during a press conference in Beijing on Friday. While policymakers have not announced measures to directly stimulate domestic demand, Finance Minister Lan Fuan promised “more aggressive” fiscal policy next year, suggesting that bolder steps could come after Trump’s inauguration in January.

Chinese export growth in October rose to the fastest pace since July 2022, continuing a months-long economic boost that could be jeopardized by Trump’s re-election and his threats to impose tariffs. Last year, Chinese companies shipped $500 billion worth of goods to America, representing 15% of the value of their total exports.

When Trump first started a trade war with China in 2018, Beijing found itself on the defensive and unsure how to respond. This time, President Xi Jinping is better prepared to fight, even though he has more to lose.

Europe

The Bank of England’s path toward further easing was complicated by Treasury Secretary Rachel Reeves’ Budget on October 30 and the election of Donald Trump as US President. The UK now plans to spend £70 billion ($90.4 billion) annually, almost half of which will be financed by borrowing. Trump threatens to impose higher tariffs in a new global trade war.

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Traders are bracing for the possibility of increased bond sales in Germany after the dismissal of a fiscal conservative government figure, prompting some in the market to consider a new administration that could be more tolerant of rising debt.

A third of Britain’s official “shopping basket” has slipped into deflation, giving another green light for the Bank of England to cut interest rates. The share of items cheaper than the previous year is the highest since the spring of 2021, before pandemic unrest and Russia’s invasion of Ukraine sent prices soaring, according to a Bloomberg analysis of the roughly 220 goods and services that make up the Consumer Price Index.

Emerging markets

Inflation has broken the upper end of the central bank’s tolerance range in Brazil and accelerated much more than expected in Chile, where rising energy costs have given policymakers another reason to worry. Interest rate futures rose in both countries as investors bet that policymakers will become more hawkish.

There is still room to continue in the rise in distressed debt that is driving gains in high-yield funds in countries as diverse as Argentina and Ukraine, according to a hedge fund with one of the best performers in the asset class.

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Vietnam is among the world’s most trade-dependent countries, with exports accounting for about 85% of its economy and the United States being its largest market. Vietnam had a surplus of about $100 billion with the United States last year, the fourth-largest imbalance with the United States after China, Mexico and Canada, and a surplus that continues to grow. At some point, this will likely put Vietnam in Trump’s sights.

In addition to the Federal Reserve and the Bank of England, policymakers in Sweden, Pakistan, the Czech Republic and Peru, as well as Gulf states including Saudi Arabia, the United Arab Emirates and Qatar, cut. Australia, Malaysia, Poland, Norway, Serbia and Romania were held. Brazil’s central bank doubled the pace of tightening and made clearer the need to cut spending to help tame inflation above the target level.

-With assistance from Philip Aldrick, Andrew Atkinson, John Boudreau, Rebecca Chung-Wilkins, Alice Gledhill, Selcuk Gokolluk, James Hirai, John Liu, Matthew Malinowski, James Major, Colum Murphy, Tom Rees, Andrew Rosati, Katarina Saraiva, Fran Wang, and Karolina Wilson.

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