Donald Trump’s victory in the 2024 U.S. presidential election means international markets will likely face more “gray swans” while also confronting increased U.S national debt and global trade fragmentation, according to Jens Larsen, director, global macroeconomics at political risk consultancy firm Eurasia Group.
At time of Larsen’s keynote speech at the Pensions & Investments WorldPensionSummit, held in The Hague, Nov. 5-7, Trump had been allocated 267 electoral college votes by the Associated Press, with 270 required to win the U.S. presidential election.
A “gray swan” event is one that is considered unlikely, but possible to occur. Larsen noted that one such gray swan was Trump’s proposed tariffs on China, leading to a knock-on effect on U.S. firms and their associated costs. That could lead to higher inflation and a reduction in U.S. growth, he said.
Larsen also noted that any mass deportations of individuals judged to be living illegally within the U.S., a policy promoted by Trump during his campaign, could have consequences such as reversing labor flows — something that also could exacerbate inflationary pressures.
“Trump's agenda, and his takeover of the Republican Party, is profound and has long-lasting implications,” Larsen said. “I think his eccentricities are important, but they're very hard to quantify and they're hard to explain.”
In his previous term as president, Trump withdrew the U.S. from the Paris Agreement on climate change.
Regarding Trump’s sustainability policies during a second term, Larsen said he did not anticipate a complete shutdown of “green jobs” created through the Inflation Reduction Act, which was enacted during the Biden administration.
“Trump is not much in favor of the green transition, but he is in favor of industrial policy, and he is in favor of the U.S. leading technological development, and will be looking to preserve as many of those green jobs in the Republican states as he can,” he said.
Larsen also said that Eurasia had not yet fully modeled outcomes in the event of another gray swan event – that Trump could become unable to continue his presidential duties during a second term, with his vice president, JD Vance, becoming acting president. But he predicted it would be largely a continuation of Trump-style policies if this were to occur.
This year has also been observed as a record for its number of national elections, with leaders being elected around the world.
Larsen identified the Mexican election, won by Claudia Sheinbaum, and the Indian election, which saw Narendra Modi return to power but with a reduced majority, as being of particular note.
“(The India and Mexico) elections show that governments that haven't shown sufficient care for the economic policy concerns of their populace have been hit really hard,” he said.
“In Mexico, the government was rewarded for showing concerns, but not in a way that a liberal economist would endorse. In India, the government succeeded in retaining its majority coalition, but only just, and punished for not showing sufficient concern in a high inflation environment.”
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