Donald Trump: America’s newly elected President Donald Trump has taken oath as the President of America for the second time. Along with this, the global equity market is also getting ready for Trump 2.0. Investors are wary of the potential for increased use of tariffs under the new administration’s policies. Donald Trump has already made it clear that he is in favor of higher tariffs. Due to this, the risk of trade war with China has increased once again. Along with this, H1-B visa and Bitcoin are also on his agenda.
Estimates offered by brokerage firms
Donald Trump’s recent statements and how his administration may impact trade tariffs, equity markets, crypto, H1-B immigration visas, and other asset classes. This assessment has been done by major brokerage firms and is presented here.
Universal tariffs are very effective in global equity markets
According to HSBC, a universal tariff of 10% could prove to be very impactful for the global equity market and it would be challenging for companies to manage this situation. About 20% of the costs of S&P 500 companies depend on imported goods.
A 10% tariff could lead to a 3-5% decline in S&P 500 earnings per share (EPS). The biggest impact will be seen on the markets of Latin America, Europe (except the United Kingdom) and North Asia.
Sectors like material, auto and semiconductor benefit in America
Sectors like material, auto and semiconductor in America will benefit from Trump’s arrival. While the consumer sector will be most affected (-6% to -8%) as it imports heavily from China.
As far as China is concerned, its affected sectors include tech hardware and equipment (15% of revenues from the US), banks (low credit growth and poor asset quality).
As far as India is concerned, 95% of analysts believe that universal tariffs will have no impact on their stocks. This market may perform comparatively better.
According to Julius Baer, capital markets currently expect stable macroeconomic factors, while policy uncertainty is at its peak. The economic policies of the Trump administration are contradictory. The Federal Reserve is likely to keep the federal funds target rate steady at 4.5% through 2025 due to the possibility of reflationary policy with higher growth and inflation under the new President.
Possibility of increase in inflation due to imposition of tariff
According to Jefferies, the biggest concern for investors as we head into 2025 is that there are numerous contradictions in President-elect Donald Trump’s policy agenda. Issues such as imposing tariffs or tightening immigration are likely to increase inflation.
As far as crypto is concerned, institutional investors cannot ignore crypto as the Trump administration prepares to bring it into the mainstream. However, Bitcoin is not seen as an alternative to gold, but as a digital alternative.
The Trump administration’s tariff-related policies could have a negative impact on Chinese exporters. However, it could also provide an opportunity for Chinese companies to set up manufacturing units in the US.
According to Nomura, Trump may soon increase tariff rates on China by fulfilling his election promises. Which will be implemented in a phased manner and inflation may increase from Q2-2025. If Trump implements tariffs as soon as he takes oath, it could lead to a huge increase in inflation.
