Expectations and uncertainties in global markets for Trump’s return to the White House

The economic world is once again at a crossroads with the return of Donald Trump to the presidency of the United States. With its inauguration on January 20, 2025, the global economic panorama is involved in a cloud of uncertainty and expectations about how their policies could mold the markets in next year.

One of Trump’s star policies during his first term was the reduction of taxes to companies and citizens. In 2025, these policies are expected to continue or even intensify. The extension of the tax cuts implemented in 2017 could inject more liquidity into the economy, promoting consumption and investment. However, this could also increase public deficit, which already exceeds 7% of American GDP. The key question is whether this fiscal expansion will be translated into sustainable growth or in uncontrolled inflation. Markets could react positively in the short term with expectations of greater benefits, but concerns about fiscal sustainability could lead to greater volatility of long -term markets. In this way, we are attending a market that I qualify as clearly bipolar: On the one hand, we have the variable income in historical maximums, quoting excess optimism and. on the other hand. We have the fixed income contributing more and more pessimism and placing interest rates at maximum 20 years to cover potential rebounds in inflation.

Protectionism was a distinctive seal of the first Trump administration and it seems that this trend will continue. Trump is expected to impose higher tariffs, especially towards China, Mexico and Canada, With rates that could reach 60% for some Chinese productss. This policy could generate a commercial war climate, negatively affecting global growth by increasing the costs of imported goods and, therefore, inflation in the United States. Emerging economies, which depend significantly on trade with the United States, could particularly suffer. However, there are those who argue that these tariffs could be a negotiating tactic, hoping to obtain better commercial conditions. In any case, the accounts come out with tariffs, because even in The hypothetical case of establishing a 10% tariff to all imports that are made in the US economythe fiscal income would be approximately $ 2.5 trillions and you are going to cut $ 10 trillion income, which needs to finance a deficit of $ 7.5 trillions in the coming years. How do you do it? Well going down types to finance with inflation.

We already saw that, during his first term, Trump openly criticized Jerome Powell, the president of the Fed, for interest rates. If Trump decides to press to influence monetary policy, we could see a scenario where interest rates remain low to favor growth, shooting inflation. Uncertainty about the direction of monetary policy could cause bond markets to be especially volatile, with possible repercussions on variable income.

However, not everything is bad. Trump has promised a significant reduction of regulations, which could benefit especially to the financial sector. Deregulation could facilitate mergers and acquisitions, promoting activity in stock markets. Banks and investment companies could see an increase in their profit margins due to lower regulatory loads. Although we cannot forget that this also increases the risk of poor ethical commercial practices that could have been contained by stricter regulations, reminding investors of the financial crisis of 2008.

With respect to emerging markets they face a double challenge. On the one hand, the strength of the dollar, which could increase with Trump’s policies, would negatively affect the economies that have debts in dollars. On the other hand, the reduction of international trade due to tariffs could reduce the demand for exports of these countries. However, some emerging economies could benefit if the United States decides to move part of its production back to the country, opening opportunities for those who may attract direct American investment.

Markets in Spain and Europe also face significant challenges and opportunities this 2025. The energy transition and the rise of renewable energies will continue to attract investments, while sectors such as technology and digitalization gain prominence. However, moderate inflation and monetary policy of the European Central Bank, even in the adjustment phase, could limit growth in some sectors. Tourism in Spain shows signs of solid recovery, promoting employment and internal consumption. In Europe, geopolitical tensions and green transition will influence the supply chain and business costs. We must highlight the divergence in monetary policy issues among the 2 continents: being the US more prone to maintaining high types than Europe, it is normal for the US to be much larger for the effect itself Carry Trade o Differential of interest rates between euros and dollars that, on the other hand, will continue to take the Eurodólar to depreciate even to parity levels.

In conclusion, 2025 will be a year of great opportunities and risks for financial markets under the presidency of Donald Trump. Tax reduction and deregulation policies could promote certain sectors, but protectionism and monetary policy could introduce volatility and uncertainty. Investors must navigate an economic landscape where politics and economy are inextricably linked. The key will be in the ability to adapt and in the constant surveillance of the political and economic signals from Washington, to anticipate market movements in an increasingly interconnected and reactive global environment to US policies.