The 2024 presidential election is over, and Republican Donald Trump is set to become the 47th US president. Trump’s return to the White House marks a historic moment with his new agenda, which promises significant changes. His proposals range from corporate tax cuts to higher import tariffs and a stricter immigration policy. Analysts believe these moves could impact not just the US, but the global economy as well.
The effects were already visible in the lead-up to his victory. The US dollar strengthened against currencies like the pound, euro, and yen. Meanwhile, emerging market currencies — such as India’s rupee, Thailand’s baht, Mexico’s peso, Brazil’s real, and Singapore’s dollar — declined against the dollar. A weakening currency often signals economic vulnerability and can trigger inflationary pressures.
On Election Day, the MSCI Emerging Markets Currency Index fell by 0.6 per cent. Among individual currencies, the Indian rupee dropped by 0.2 per cent, reaching a new low. The Singapore dollar and Thailand’s baht fell by 1.3 per cent and 1.9 per cent, respectively, while South Africa’s rand fell by 1.5 per cent. Mexico’s peso took the biggest hit, dropping nearly 3 per cent to a two-year low. In Iran, the U.S. dollar traded as high as 703,000 rials on November 6th.
Trade and Tariffs
Donald Trump has long championed higher import tariffs, threatening to impose heavy duties on countries that may pose economic risks.
“To me, the most beautiful word in the dictionary is tariff,” President-elect Trump said at a campaign rally.
During his first term, he raised tariffs on numerous Chinese goods and placed tariffs on EU imports. In his campaign, Trump proposed a 10 per cent blanket import tax on all goods globally and a 60 per cent tariff on imports from China, with an additional 25 per cent tariff on Mexico.
Such tariffs would make goods from countries like China and Mexico more expensive, likely reducing demand. For China, the world’s largest exporter, a loss of U.S. markets could significantly impact its economy. These tariffs could also affect global economic growth, with the International Monetary Fund (IMF) projecting it at just 3.2 per cent for next year. The IMF warns that other countries might retaliate, leading to a trade standoff that could hit emerging markets.
In a recent interview, IMF First Deputy Managing Director Gita Gopinath stated that if Trump’s tariffs take effect, the global economy could lose nearly 7 per cent of its GDP — equivalent to the economies of France and Germany combined.
The China Factor
American tariffs have primarily targeted China, whose oversupply in various sectors has allegedly hurt global companies, not just U.S. Trump’s successor, Joe Biden, even continued with Trump’s tariffs, doubled down on some of them like tariffs on electric vehicles. Outgoing U.S. Treasury Secretary Janet Yellen has urged China to “support domestic demand” to boost consumption, pointing out that China’s high savings rate that creates imbalances.
Experts warn that tariffs won’t necessarily stop Chinese goods from entering the U.S; instead, China may redirect these products to other markets. The resulting oversupply could reduce prices in places like Europe, exacerbating inflation.
“This is not a good result for Europe,” said Leslie Vinjamuri, director of the U.S. & Americas Programme at Chatham House, noting that European economies are already grappling with low competitiveness.
India, however, sees Trump’s presidency as an opportunity. At a recent meeting in Australia, Indian External Affairs Minister S. Jaishankar suggested that Trump’s victory could “disrupt the world order,” potentially benefiting India.
Inflation and Interest Rates
For the U.S, higher tariffs could mean higher costs for consumers. The Federal Reserve has just started a rate-cutting cycle as inflation cools post-COVID. However, if tariffs drive prices back up, the Fed may resume rate hikes. When the U.S. raises rates, borrowing becomes more expensive globally, particularly for emerging markets dependent on the dollar. This effect was evident in 2022 during the Fed’s previous rate hike cycle.
Countries like Mexico, which rely heavily on U.S. exports, could face rising inflation and interest rates, leading to economic strain.
In addition to economic policy, Trump has vowed to crack down on illegal immigration, including a large-scale deportation campaign. This move could affect Latin American countries whose economies heavily rely on remittances from immigrants in the U.S. For instance, about 30 per cent of Honduras and Nicaragua’s GDP comes from U.S. remittances, while El Salvador’s economy depends on them for 24 per cent of its growth.
Trump’s agenda also includes rethinking U.S. involvement in ongoing conflicts. He has repeatedly expressed a desire to end costly military engagements, pointing out that the U.S. has provided over $64 billion in military aid to Ukraine and nearly $18 billion to Israel since the Gaza conflict began.
Trump also intends to renegotiate America’s role in NATO, pressing European nations to bear more defense costs—an unwelcome demand for an inflation-hit Europe still recovering from pandemic-era deficits.
“We must be prepared for more tensions between the U.S. and China, with significant implications for Europe,” said Carsten Brzeski, Chief Economist at ING Diba. He warned that another Trump term could push an already weakened European economy from “stagnation into recession”.