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Trump’s Economic Policies Expected to Drive Inflation, Affect Global Markets
With former President Donald Trump’s historic reelection victory, financial experts warn that inflation is likely to rise in the United States and globally if Trump implements his campaign pledges, which include aggressive tax cuts, strict immigration policies, and high tariffs on imported goods. CNN projected Trump’s victory on Wednesday, securing him a second term in office alongside a Republican majority in the Senate, positioning him to enact a potentially transformative economic agenda.
U.S. stock markets surged following Trump’s win, and the dollar strengthened against major currencies as traders braced for increased inflation and fewer interest rate cuts from the Federal Reserve. Matthew Ryan, head of market strategy at Ebury, noted that a stronger dollar reflects investor expectations that Trump’s policies—particularly on tariffs and immigration—will boost inflation and potentially lead to elevated interest rates.
“Investors are bracing for tariffs… which will push up the price of imported goods for American shoppers,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown. Trump’s promise of mass deportations could also raise wage costs for U.S. companies by limiting the labor pool, she added.
Higher Tariffs on Imports
During his campaign, Trump proposed raising tariffs to 10-20% on all imported goods, a drastic increase from the current 2% average, with a 60% tariff specifically on Chinese imports. He has also suggested tariffs as high as 200% on cars manufactured in Mexico or by U.S. companies that relocate production there. According to analysts, these tariffs would act as a tax on imports, increasing costs for consumers and businesses reliant on imported materials.
Economists warn that higher tariffs could disrupt the Federal Reserve’s interest rate strategy. Nomura analysts indicated that due to anticipated inflation from tariffs, they now expect only one rate cut in 2025, with policy likely remaining on hold until inflation subsides.
Impact on Global Markets and Trade
The effects of Trump’s tariffs could reverberate beyond U.S. borders. If trading partners impose retaliatory tariffs on American exports, global inflation could rise, potentially stunting world trade and economic growth. “A material increase in global inflation would follow, while the ensuing hit to world trade would negatively impact growth,” noted Investec chief economist Philip Shaw and economist Ellie Henderson.
A stronger dollar could also impact global inflation, particularly for countries that rely on commodities priced in U.S. dollars. As the dollar gains strength, these countries may face higher costs for essential goods, which companies would either have to absorb or pass on to consumers. This effect could force adjustments in international markets, with some countries like China potentially offloading excess goods to other nations with lower tariffs, possibly dampening inflation in those areas.
Risks for Key Trading Partners
Economies heavily reliant on U.S. exports, such as Canada and Mexico, may feel the direct impact of Trump’s tariffs. BMI, a market research firm under Fitch Solutions, warned that Mexico, Canada, and other nations with trade surpluses, including China, Japan, Germany, and South Korea, could face pressure to increase imports of U.S. goods. A 60% tariff on Chinese goods alone could cut China’s economic growth by up to 0.8 percentage points over the next two years, according to BMI.
German exporters could also experience significant setbacks if Trump enacts a 20% tariff on all trading partners. The Ifo Institute for Economic Research in Munich warned that German exports to the U.S.—its largest market outside the EU—could drop by around 15%, potentially posing a severe economic challenge for both Germany and the EU.
As Trump prepares to implement his economic agenda, economists expect a turbulent period for global markets, marked by inflationary pressures, potential trade conflicts, and shifting alliances.
News
Europe Forms ‘Coalition of the Willing’ to Support Ukraine Amid Uncertainty Over U.S. Role
European leaders have officially launched the “Coalition of the Willing,” a multinational effort led by the United Kingdom and France to support Ukraine in its ongoing war with Russia. The coalition, formed in response to shifting global diplomacy and concerns over Russia’s expansionist agenda, aims to ensure Ukraine’s sovereignty and prevent further escalation in the region.
A Response to Trump-Putin Negotiations
The formation of the coalition gained urgency following a surprise phone call between former U.S. President Donald Trump and Russian President Vladimir Putin on February 12. The call, which took place without prior consultation with European allies, raised alarms across the continent, prompting European leaders to take a more proactive role in shaping the future of the conflict.
Since then, multiple high-level summits have been held, with French President Emmanuel Macron and UK Prime Minister Keir Starmer spearheading the initiative. “Our goal is clear: to secure peace,” Macron stated. “To do this, we must put Ukraine in the best possible position to negotiate and ensure a lasting peace for all Europeans.”
Who Is Part of the Coalition?
The coalition has grown rapidly, now including 33 delegations from across Europe and beyond. Leaders from Germany, Italy, Spain, Poland, Sweden, and other EU nations have joined, alongside representatives from NATO and the European Commission. Notably, Turkey, Australia, and Canada have also taken part in discussions.
However, some key countries remain absent. Austria and Malta have declined participation due to their neutral status, while Hungary and Slovakia, both NATO members, have resisted military support for Ukraine. The United States has not formally joined the coalition, though European leaders remain hopeful that Washington will provide some form of assistance, particularly in intelligence sharing and air defense.
Key Objectives of the Coalition
The coalition has outlined three main areas of focus:
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Military Support for Ukraine – European nations have pledged continued military aid, including artillery, air defense systems, drones, and training programs to strengthen Ukraine’s armed forces.
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Deployment of a ‘Reassurance Force’ – A new security force, composed of Western troops, will be stationed in Ukraine at key locations such as cities, ports, and power plants. The goal is to deter Russian aggression rather than engage in frontline combat. France and the UK have already committed soldiers, with Sweden, Denmark, and Belgium considering participation.
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Strengthening European Defense Capabilities – The European Commission has proposed an €800 billion investment plan to enhance Europe’s defense industry, with Ukraine set to benefit from these funds.
Uncertainty Over U.S. Involvement
While European leaders have made diplomatic efforts to engage the U.S., there is little clarity on whether Washington will actively support the coalition. Trump’s administration has hinted at reducing American troop presence in Europe, raising concerns about long-term transatlantic security commitments.
Despite this, Starmer remains optimistic. “This is a force designed to deter and send a message to Putin that this peace deal will be defended,” he stated.
Next Steps
The coalition is now working to finalize details of the reassurance force, including troop numbers, locations, and operational structures. Ukrainian President Volodymyr Zelenskyy has invited military representatives to Kyiv to begin planning, with a follow-up summit expected in the coming weeks.
With Europe taking the lead, the coalition marks a significant shift in the West’s approach to the war, signaling that European nations are prepared to act independently if necessary to safeguard Ukraine’s future.
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