Donald Trump’s victory over his political opponent Kamala Harris ushers in a perilous new era for the United States and the rest of the world. The former president promised a “golden age for America” after his third election campaign produced his most convincing victory. But any short-term gains for corporations and investors must be set against his authoritarian instincts and willingness to further question the US-led international order. That puts an already fraying global balance at even further risk.
Over the coming four years, businesses can expect a cascade of tax breaks, regulatory rollbacks, and favourable court decisions. The chances of Congress, which now includes a Republican majority in the Senate, raising the corporate tax rate above 21 per cent during next year are now virtually nil; Harris wanted to raise it to 28 per cent.
Spending cuts to pay for other tax reductions are likely, as well, although control of the House of Representatives remained up for grabs early on Wednesday morning. Divided government would make it harder for Trump to overhaul the Affordable Care Act, after Republicans failed to do so during his first term. Wall Street will cheer new appointees for major banking and markets regulators who are sure to be friendlier than outgoing President Joe Biden’s. And the crypto industry will likely get its long-sought regulatory legitimacy, a force multiplier for its potential growth. The dollar, US stock futures, and bitcoin all rallied in anticipation of Trump’s victory.
But broaden the scope, and a second Trump presidency has consequences well beyond a short-term sugar rush in financial markets. The former reality TV host has promised to go after his political opponents, including the media and business interests that may oppose his decisions. He has pledged to step up deportations and raids on companies that employ immigrant labour.
Around the world, American allies will have to deal with a president who has cozied up to enemies like Russia, has been sceptical of European alliances, and has weakened the fight against climate change. He promises to supercharge the growing confrontation with China, with 60 per cent tariffs just the beginning of possible disagreements between the countries. He could strengthen Russian President Vladimir Putin’s hand in the war with Ukraine.
The new administration will also impose costs on the world’s largest economy. Trump’s obsession with imposing across-the-board 20 per cent tariffs on all imports, even if modified, will directly transfer to higher prices for consumer goods. If he appoints a dovish or sycophantic Federal Reserve chair in 2026, inflation could return. If implemented, Trump’s policies would add nearly $8 trillion in new debt by 2035, according to the research outfit Centre for a Responsible Federal Budget.
Trump on Wednesday thanked Elon Musk, who went all-in on Trump’s re-election. Promises that the Tesla co-founder will slice some $2 trillion from annual government spending show the outlandishness of the plans: total discretionary outlays were $1.7 trillion in 2023. If Trump succeeds in rolling back Democrats’ climate legislation, emissions goals will fall further out of reach, causing untold environmental damage and putting US companies at a disadvantage in developing renewable technologies.
Even greater than the financial fallout, though, will be the extent to which Trump undermines US institutions. In a 2023 paper, Princeton University’s Layna Mosley examined the economic risks of democratic backsliding, including in the United States. Investors want long-term stability where they can count on legal accountability and fair treatment that doesn’t depend on which party is in power. Much about Trump’s next administration is hard to predict. But his return to the White House further undermines that stability – in the United States and in the rest of the world. — Reuters
Gabriel Rubin
The writer is a US columnist for Reuters Breakingviews covering business and economics in Washington, DC.
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