Trump 2.0 – Implications

Donald Trump will be president of the United States for the second time, a development that will dramatically alter the course of American society and have many implications for the world order. The fact that the Senate has shifted to the Republicans will enable Trump, notably in assembling his cabinet and in shaping new legislation. In policy terms, an important difference between the next and the previous Trump government will be an ideological coherence and more singular organisations. In addition, the Trump victory will likely trigger a shift in power within the Democratic party.

Amidst a very strong turnout, America looks divided, and the campaign has been rancorous. Trump’s election will have implications for healthcare, women’s health, immigration, and law – in most cases not for the better.

In terms of foreign policy, the world’s view of America will change, compared to the sense people have had of it over the past fifty years. The re-shaping of the Middle East, to Iran’s detriment, will accelerate. It is likely that Trump will push for a deal of sorts between Ukraine and Russia, though Ukraine and Europe may well contest the parameters of this.

Europe will feel lonelier diplomatically and will need to become more independent. A power shift from large countries like Germany to eastern states like Poland, as well as Italy, will occur and Viktor Orbán will continue to irritate colleagues. For the UK’s Starmer-led government, the notion of the ‘special relationship’ may well be over.

Ireland may not suffer diplomatically in the way Germany or the UK might, but trade and investment policy are more uncertain now, and there is a growing sense that like other European countries, there is a divergence between American society and that of Ireland.

Economically, there is a perception that Trump is ‘good for business’ in the sense that regulation will be pared back, and taxes can fall. Trade policy is likely to be much more aggressive, granted some of the policies that have been crafted by members of the Trump entourage, and, few allies (i.e. Japan, South Korea) will be spared. Europe will be pivotal here in terms of how it plays the US-China trade relationship.

Trump may find that the one force that reins him in is the bond market. In the context of a very high deficit and near record levels of government debt, the room for fiscal manoeuvre is limited, though he is not known to favour tax hikes. In that respect, bond and dollar volatility may be the financial markers of the second Trump presidency, and this could well be exacerbated if he changes the make-up of the Federal Reserve’s monetary policy committee.

Equities may see a short-term rally, but valuations are now at historically high levels, and ironically international investors may prefer to consider emerging and European assets.

About the Author

A native of Cork, now living in Paris, Mike O’Sullivan started his career as an academic at Oxford and Princeton. Mike has over twenty years’ experience in global financial markets, most recently as CIO at Credit Suisse Wealth, and is an expert in European financial policy, working with several European fintech firms. A regular contributor to Newstalk and Forbes, Mike is the author of The Levelling (What’s next after globalization?). He has written two books on Ireland (‘Ireland and the Global Question’, and ‘What did we do right?’) and was an independent member of Ireland’s National Economic Social Council (NESC) from 2011-16. He is a Director and Strategic Adviser at Unio and chairs the Unio Global Macro Council and the Unio Investment Committee. 

The opinions expressed in this article are solely those of the author and do not necessarily reflect the views or policies of Unio.