The effects of Trump’s second term can already be seen and heard.
As the dust settles on a keenly contested US presidential election, the focus will shift to the likely consequences and disruptions in the foreseeable future – for one, in terms of the economic impact of Donald Trump’s second term as president. Trump ran a campaign centered on the promise to Make America Great Again (MAGA). Outside the US, such a campaign promise sounds odd primarily because the US has long been, and continues to be, the world’s preeminent economic power. Within the US, however, there has been palpable resentment towards the process of globalisation, fueled by a perception that the rest of the world has benefited at the cost of the US. Since the start of his first presidential campaign in 2016, Trump has aggressively voiced this sense of grievance and repeatedly promised to protect US interests by adopting policies that are firmly “America First”.
Since the end of the Second World War, and especially after the Cold War, the US has shepherded the world order through its military might as well as by laying down the rules and regulations for global trade and commerce. In the first term, Trump’s policies sought to upend this global order as the US adopted a more inward-looking, insular and transactional approach. This came as a shock to both its allies and competitors. For instance, Trump has questioned the role of other NATO allies and demanded that they contribute their full share. A key feature of his first administration was the sharp ramping up of tariffs and trade restrictions vis a vis China. In his second term, Trump promises, or threatens, to do more of the same. He intends to use punitively higher import tariffs as the primary weapon to cut trade deficits that the US has with the EU countries and Asian economies such as China and South Korea. He has also promised not to drag the US into new international conflicts and is unlikely to ramp up support to existing ones, such as the war between Russia and Ukraine.
The effects of Trump’s second term can already be seen and heard. Germany’s coalition government collapsed on Wednesday after Chancellor Olaf Scholz sacked his finance minister, and coalition partner, Christian Lindner. The apparent trigger was Scholz’s demand for raising more debt to support Ukraine at a time when Trump’s White House is expected to cut funding. Trump’s tariffs are expected to raise the US’s domestic inflation and, with that, force the US central bank to keep interest rates high. Trump tariffs will most likely also result in a trade war that will disrupt established global supply chains. But there are a few ways in which India may benefit as well. One, if the US decides to drill more oil, it could lead to lower fuel prices in the medium to long term. Two, Trump’s desire to cut illegal migration by providing green cards to international students who study in American universities could make it easier for some Indians to live their American dream.
