The former Republican president clinched the presidency by securing enough electoral college votes, achieving critical victories in the battleground states of Georgia, North Carolina, and Pennsylvania.
With polling now clear, InvestorDaily brings you a look at what the next Trump presidency could mean for Australia and the broader global economy.
Speaking on a recent InvestorDaily podcast, AMP's Shane Oliver suggested that Trump’s tax and spending policies could prove favourable for the US stock market, drawing comparisons to "Reaganomics". He noted that while Trump’s renewed trade wars could harm shares, his proposed lower corporate tax rates, including a potential 15 per cent rate for US-based manufacturing, would likely boost profits and investor confidence.
Reflecting on Trump’s first term, Oliver highlighted how markets surged by 38 per cent following his 2016 victory, spurred by tax cuts and deregulation. However, he cautioned that in 2025, the sequence of policies will be key.
According to Oliver, if Trump prioritises tax cuts and deregulation, markets could see short-term gains, though higher debt may be a longer-term concern.
But while Trump’s tax cuts and deregulatory policies could stimulate the supply side of the US economy, Oliver warned of potential inflationary pressures tied to higher tariffs, decreased labour force growth, and actions that might undermine the credibility of the Federal Reserve.
There’s also a risk that a growing budget deficit – already high at 125 percent of GDP – could lead to market backlash and drive up bond yields.
But the most significant disruption anticipated from a Trump presidency for Australia relates to trade.
While Kamala Harris was expected to uphold current policies - retaining Trump’s initial tariffs and introducing additional subsidies for green manufacturing in the US - Trump has threatened to escalate protectionism dramatically.
According to Oliver, a substantial increase in tariffs, such as a 60 per cent levy on Chinese goods or even 20 per cent on European and Japanese imports, would disrupt global trade and slow economic growth, ultimately affecting Australia’s economy.
He highlighted an OECD study that showed that Australia could suffer a 1.2 per cent reduction in GDP as a result of a 10 per cent reduction in global trade between major countries.
Moreover, Australia is vulnerable to an intensification of trade wars.
"If you go into a trade war, it'll be bad for global growth and economic activity, which also has an impact on Australia directly as a result of that," Oliver noted.
While Oliver acknowledged that Trump may not be entirely committed to extreme tariffs and may use them as leverage to boost US production, even the threat of such measures could create volatility in the global markets, as seen during the 2018 trade tensions.
“Of course, similar fears existed during the last Trump trade war, and it didn’t turn out so bad. And there would still be demand for iron ore somewhere – it just may switch from China to the US and elsewhere,” the chief economist elaborated.
Initial market reaction
Dr David Allen, portfolio manager of the Plato Global Alpha Fund, highlighted market reactions to the US election on Wednesday night, noting a significant rise in treasury yields as investors anticipated a resurgence of inflation driven by Trump’s proposed tax cuts and tariffs.
"Markets leaned heavily into Trump trades within an hour of the first poll closing. One of the most notable moves has been the double digit rise in treasury yields across the curve, underpinned by concerns Trump-led tax cuts and tariffs will reignite inflation. Whether this is an overreaction will depend on Trump’s bite being as strong as his bark, particularly around the tariffs," Allen said.
"At the same time S&P futures rose ahead of the US open and what’s interesting for investors is the move in the Russell 2000, which is dominated by smaller, more domestically orientated companies. US Small Caps have underperformed large caps for several years now, but the market seems to be tipping a turning point as Trump’s more aggressive stance on tariffs along with deregulation and tax cuts could help these companies".
Energy markets, meanwhile, saw oil prices dip by 1.5 per cent, but stocks of major oil companies like Exxon, Chevron, and Halliburton rose in after-hours trading, reflecting optimism about Trump’s favourable views on domestic oil production.
Allen also downplayed fears about the technology sector under a Trump presidency, suggesting that most large US tech firms would remain unaffected due to their strong revenue streams and cash reserves.
