Donald Trump promised to “make heads spin” on his first day back in the White House on Monday. In the hours following his inauguration, the US president signed a slew of executive orders, including revoking 78 of the executive actions issued under the Joe Biden administration, declaring an emergency at the US border with Mexico and withdrawing from the Paris climate agreement.
However new tariffs on foreign imports, which he had pledged to impose once in power, were not announced on his first day in office. This led to a relief rally in global indexes and key foreign currencies against the dollar.
Trump’s policy decisions will shape the trajectory of the US markets for the next four years and impact the global economy. “There is an anticipation that his pro-business stance could spur global growth,” says Kate Leaman, chief market analyst at broker AvaTrade. “But the short-term market volatility as policies roll out will require a steady hand.”
Tariffs are delayed, not dismissed
Despite the absence of tariffs in Trump’s initial raft of executive orders, he has since pledged to impose a 25% tariff on goods from Canada and Mexico, as well as a10% duty Chinese imports from February. Plans to create an “External Revenue Service”, a new government agency to collect all tariffs, duties and revenues from foreign sources, were also announced.
Trump told reporters at the White House that tariffs on Canada and Mexico may come as early as next month. He also said he wanted to reverse the US trade deficit with the EU through tariffs or more US energy exports.
The US President had previously threatened a 60% tariff on Chinese-made goods while on the campaign trail. A 10% charge on global imports was also mooted.
For UK businesses, this could mean higher costs on goods coming via these routes, and potentially new opportunities to fill gaps left by disrupted US-China trade. At the same time, industries like automotive and manufacturing may face challenging adjustments as global trade flows realign.
“Strict import duties are expected to be introduced in the US and manufacturers in the UK must be prepared for change,” says Charlotte Langdon, partner at advisory and accountancy firm Menzies. “Staying on top of product classifications and customs regimes that apply to differing products and tariffs is critical to avoid costly fines and ensure business continuity.”
There are potential opportunities that may arise from this that UK companies should be aware of. “UK products may end up being more competitive than other markets with more unsustainable rates,” Langdon says. “In this case, and particularly for businesses struggling to access EU markets, considering diversifying in both product and market may prove a profitable decision.”
Businesses must avoid reacting to tariffs in isolation, he adds. It’s inevitable that they will have an impact, but they may go hand-in-hand with other policies, such as corporate tax reductions.
Energy is another area to watch. If Trump’s policies encourage the EU to source more oil and gas from the US to sidestep tariff threats, it might push up energy costs globally, which could hit UK businesses and households. “Higher energy prices could also add pressure to inflation, something the Bank of England (BoE) will be keeping an eye on,” says Leaman.
Trump’s protectionist stance risks stoking inflation
There is a possibility that Trump’s policies such as tariffs, tax cuts and mass-deportations could all be inflationary. If US inflation remains elevated, or starts rising again, the Federal Reserve will be less likely to cut rates.
This may affect other central banking polices around the world, says Gabriella Macari, a senior investment manager at private bank Arbuthnot Latham. “For example, the Bank of England is under pressure to lower rates and ease monetary policy conditions, which would reduce the cost of borrowing for households and businesses. However, if the BoE did continue to cut rates while the US rate remains higher, a lower UK interest rate environment would likely result in a weaker pound.”
This has implications for multi-national businesses and households who buy goods and services from foreign companies. However, a weak pound would be a positive for large-cap equities, such as the FTSE 100 index, according to Macari, as it will increase the relative value of overseas earnings.
She adds: “Even if an investor only holds domestic assets like UK government gilts, UK property or UK-listed stocks, these assets will be influenced by global forces and the US is one of, if not the, strongest global force at play.”
The rise of crypto under Trump’s leadership
The cryptocurrency and blockchain industries have a lot to be optimistic about as Trump enters his second term. The official Donald Trump memecoin, known as $TRUMP, has risen in market value since its launch last week – a symbol of the new crypto-friendly US administration.
A memecoin is a type of cryptocurrency inspired by internet trends. They are extremely prone to crashes and have been likened by traders to buying a lottery ticket.
Trump has expressed plans to establish a crypto advisory council and has given industry supporters, including Republican blockchain entrepreneur Bernie Moreno, who was sworn into the Senate last month, a voice within his administration.
The SEC announced the creation of a new crypto task force in a statement on Tuesday. The task force aims to clear up confusion over which crypto companies are required to register with the SEC and will be seeking comments from investors and industry experts to create a new regulatory policy.
Crypto investors are anticipating a resurgence of opportunity and a relaxing of regulation under the Trump presidency. This enthusiasm helped lift Bitcoin’s valuation, which hit record highs ahead of Trump’s inauguration.
His campaign highlighted a focus on crypto initiatives, which could innovate these sectors and position the US as a leader in Web3 technology. Bill Hughes, senior director of global regulation at blockchain software company Consensys, says this could have a positive impact on the UK’s crypto and Web3 industries, depending on the stance regulators take. “The US is poised to aggressively pursue policies promoting blockchain innovation and investment in talent. Meanwhile, British leadership appears to have cooled on its Web3 ambitions, with UK citizens twice as likely as others to associate crypto with illicit activity.”
However, the fact the US President is touting his own memecoin has raised ethical questions over his crypto-friendly political agenda. As one crypto venture capitalist told the Financial Times: “Call me old fashioned but I think presidents should focus on running the country. Not to mention the obvious conflict of interest given the fact that Trump can set crypto policy.”
For a sector that has been striving to build credibility, Trump’s policies on cryptocurrency and the creation of his own cryptocoin risk having the opposite effect.
Donald Trump promised to "make heads spin" on his first day back in the White House on Monday. In the hours following his inauguration, the US president signed a slew of executive orders, including revoking 78 of the executive actions issued under the Joe Biden administration, declaring an emergency at the US border with Mexico and withdrawing from the Paris climate agreement.
However new tariffs on foreign imports, which he had pledged to impose once in power, were not announced on his first day in office. This led to a relief rally in global indexes and key foreign currencies against the dollar.
Trump’s policy decisions will shape the trajectory of the US markets for the next four years and impact the global economy. “There is an anticipation that his pro-business stance could spur global growth," says Kate Leaman, chief market analyst at broker AvaTrade. "But the short-term market volatility as policies roll out will require a steady hand.”
