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The world’s economic and political wellbeing is hostage to Trumps impulses

The world’s economic and political wellbeing is hostage to Trumps impulses

  • 21.03.2025 03:56
  • livewiremarkets.com
  • Keywords: Trade War, Inflation, Economic Instability

Donald Trump’s return as US President has sparked alarm over his tariff policies and impulsive decision-making, disrupting global trade and raising inflation fears. His actions have created economic instability, with falling share prices and concerns about a potential recession. The world’s economic and political structures remain hostage to his unpredictable impulses.

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Estimated market influence

US Federal Reserve

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The US Fed is concerned about Trump's policies affecting economic stability.

University of Michigan

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Consumer inflation expectations have risen, indicating economic uncertainty.

Peterson Institute for International Economics

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Provided estimates showing negative economic impacts from Trump's tariffs.

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Elon Musk is leading the Department of Government Efficiency, which could reduce government spending and jobs.

SpaceX

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Musk's role in DOGE may lead to economic instability through reduced government activity.

Context

Analysis: Business Insights and Market Implications of Trump's Return

Key Facts and Data Points:

  • Tariffs Announced:

    • 25% tariffs on Canada and Mexico
    • 20% tariffs on China
    • 25% tariffs on all steel and aluminum imports
    • Proposed 25% tariffs on cars, semiconductors, and pharmaceuticals

  • Market Impact:

    • US share prices fell ~10% post peak in mid-February
    • Australian shares also saw sharp declines

  • Inflation Expectations:

    • University of Michigan survey: Inflation expectations rose to 3.9% (5-10 year horizon) in March from 3.2% in January
    • Increase of 0.7% in inflation expectations over two months

  • Economic Impact Estimates:

    • Peterson Institute estimates:
      • US economic activity: -0.3% below potential over 3 years (2025-2027)
      • Canada: -2.5%, Mexico: -2%
      • China: -0.2% for 10% tariff, potentially doubled to ~0.4% with 20% tariff

Market Trends and Business Impact:

  • Trade Uncertainty: Chaotic tariff announcements have created confusion in global trade relationships.
  • Consumer Prices: Evidence from previous tariffs suggests consumers bear the cost, leading to inflation risks.
  • Investor Concerns: Multiple fronts of uncertainty including tariffs, immigration policies, fiscal tightening, and deregulation are impacting market confidence.

Competitive Dynamics:

  • US Allies: Severe tariff impacts on close allies (Canada, Mexico) contrast with lenient treatment of adversaries like Russia.
  • Global Trade Relations: Retaliatory measures from other countries could exacerbate trade tensions.

Strategic Considerations:

  • Regulatory Environment: Deregulation policies may weaken oversight, affecting industries and market stability.
  • Labor Market: Potential mass deportations could strain labor supply in critical sectors, increasing inflation risks.

Long-term Effects and Regulatory Impacts:

  • Economic Growth Risks: Cumulative negative impact on GDP growth over the next three years.
  • Federal Reserve Response: Uncertainty around interest rate policy to combat inflation.

Conclusion:

President Trump's policies are creating significant economic and political uncertainty, with far-reaching implications for global trade, inflation, and market stability. The unpredictability of his decisions leaves businesses and investors grappling with multiple risks, highlighting the need for adaptive strategies in an increasingly volatile environment.