Following the election of Donald Trump and the significant changes anticipated for the ROW-US relationship from a Trump 2.0 presidency;

Mark Dempsey, Senior Director of Consulting at GlobalData, a leading data and analytics company, offers his view on some of the ramifications of Trump 2.0 for the ROW as market shocks and new opportunities lie ahead:

“Trump 2.0 signals a seismic shift in US politics and significant ramifications for the ROW with the prospect of 10-20% tariffs on all US imports with China’s set at 60%, US-China decoupling set to accelerate, and a rampant proliferation of the tech war, it’s clear a more protectionist and disruptive US is here to stay.  But how radical will he be? Which version of Trump will ultimately show up at the White House?

“It looks like Trump will make good on his most commonly repeated campaign pledges – starting with his plan to upend global trade with a 10-20% baseline global tariff and 60% or higher tariff on Chinese imported goods.

“As and when Trump implements his tariff plans, this will cause serious disruption – in particular, adding significant additional costs for importers. Despite Trump’s assertions to the contrary, tariffs are paid by the companies or entities importing goods and not by the countries themselves. This means the cost of buying products from overseas, whether directly or as an input for manufacturing, would rise sharply along with retail prices.

“However, you can expect the ROW to devise retaliatory tariffs of their own commensurate with those imposed on them. This level of intervention on both sides will likely start a new global trade war. With tariff hikes hitting all Chinese exports to the US it could knock 2 ppts from China’s potential GDP growth as China’s global export market share today is near an all-time high – unless China responds with a stronger package of stimulus to its own domestic demand.

“The other form of ROW retaliation is market rather than policy-based – namely, major world currencies weakening relative to the US dollar to offset the higher cost of ROW exports to the increasingly protectionist US. An ever strong dollar – a prospect already showing up in the immediate market reaction to Trump’s election victory – runs contrary to Trump’s strategy of reviving American manufacturing industry, but is an inevitable consequence of his tariff strategy.

“We are still in the very early innings of the AI revolution, but this is likely to be at the forefront of the continuing US-China decoupling and tech war with China. It is already clear that a few core elements will drive the next ‘great game’ of superpower rivalry. These include advanced microchips, data centres, the energy to power the data centres and the trillions of dollars in capital flows to make this vision possible. That – plus the critical minerals required to produce these inputs. Yet with old economic models breaking apart but new ones not yet fully materialized, it is an open question which approach will prevail – that of a more positive tech trade policy of ‘running faster’ vs the negative one of ‘tripping your opponent’.

“Trump also wants higher US oil & gas output to reduce energy costs. While many of his other policies such as tariffs and tax cuts look inflationary for the US economy itself, this energy policy might produce an offsetting deflationary impact for the rest of the world and will potentially be good for consumer industries’ supply chain costs.

“Despite the shock of change, it should be noted that changes happen at the margins and occurs over time. The hope will be that tough campaign talk on tariffs modulates into a reprise of Trump’s transactional approach whereby he used actual and threatened tariff hikes to extract concessions on trade and related economic matters such as exchange rates. In that case, the Trump 2.0 ‘trade war’ might yet prove relatively modest in scope.”