Donald Trump's return to the White House has boosted the US market with an exciting cash flow, but analysts also predict that the US's tariff policies, trade "wars", and immigration restrictions in the coming time could create an "uncomfortable" situation for the world.
Donald Trump returns to the White House: Market excitement and pressure in the medium term
Donald Trump's return to the White House has boosted the US market with an exciting cash flow, but analysts also predict that the US's tariff policies, trade "wars", and immigration restrictions in the coming time could create an "uncomfortable" situation for the world.
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| Investors' appetite for risk and betting on the US financial market is increasing (Photo: Shutterstock) |
US financial markets are excited
“Stocks hit all-time highs, U.S. bond yields surged and the dollar had its best day since 2022. The S&P 500 rose 2.5% as investors bet on the president-elect enacting pro-growth policies to boost U.S. businesses. The index had its best post-election day on record, according to data compiled by Birinyi Associates Inc. and Bloomberg.”
This is what you can see from a Bloomberg analysis, and it is just one of more than 40 “extremely optimistic” analysis articles appearing in the market analysis dataset that the author of this article tracks, with the help of an AI tool that “scrapes” analysis articles on trading systems and news.
The percentage of optimistic “tones” on the trading day after Mr. Trump won the 2024 US presidential election was among the most optimistic 1% since 2023, matching the historical one-day increase of US stocks.
The tariffs that Mr. Trump plans to impose on goods imported into the US remain the main issue.
There were some notable takeaways from the market reaction. The small-cap index rose 5.8% amid speculation that they would benefit from Mr Trump’s protectionist stance, while bets on tax cuts and deregulation boosted bank stocks.
Cryptocurrency assets have also surged, with bitcoin surpassing $75,000. Cryptocurrency investors believe that Mr. Trump has a supportive mindset for the asset class. In June 2024, during a meeting with dozens of senior executives and experts in the cryptocurrency industry, Mr. Trump declared: “If cryptocurrency is going to shape the future, I want it to be mined in the United States.” He has repeated this statement several times this year.
The US market has seen a sharp rise in many medium- to high-risk assets, reflecting investors’ increased risk appetite and love of betting. Some financial news sites commented, “the market is in a very excited state”.
Assessing short-term and medium-term impacts
When Donald Trump returns to the White House, in the short term, the US market will be boosted by the excited cash flow thanks to tax cuts and a more open business environment.
Mr. Trump plans to reduce taxes for American businesses. The tax cuts that Mr. Trump signed in 2017 will expire in early 2025. According to analysts, he will extend all of these policies, while also reducing taxes for businesses and individuals. This is expected to boost economic growth and create jobs, attracting foreign investors to buy American assets, such as stocks and real estate, because of lower taxes (in the context of many countries increasing income taxes and taxes on assets as well as capital gains).
In the “race” to the White House, Democratic candidate Kamala Harris has made moves that are considered to support tightening bank capital safety regulations, restricting high-risk financial products, including somewhat risky, highly leveraged ETFs, and tightening products such as cryptocurrency ETFs. Therefore, Mr. Trump won and his economic advisors, who came from banking and hedge funds, believe that he will be more open to financial products, reducing regulations on banks and financial markets. This will not only “untie” the banking sector, but also open up capital for high-risk investment deals.
That is why the market is optimistic about medium and high-risk assets in the US. But looking ahead to the second half of 2025 and beyond, it is not certain that this will be enough to "keep the fire burning" for the US and global markets.
In the medium term, the market may face pressure from tariffs, a wide-ranging trade war, a stronger USD, and a return to inflation.
The tariffs that Mr. Trump plans to impose on goods imported into the United States remain the main issue. One oft-repeated point is that he wants to impose a 10% or higher tariff on all goods entering the country. For China alone, the tariff could be as high as 60%.
Whether these “threats” or “promises” will come true is unclear, but according to the Economist in July 2024, these moves could trigger retaliation from China and Europe, leading to a comprehensive and widespread “trade war”. This poses risks to global economic growth, and the International Monetary Fund (IMF) said that, in the worst case, it could reduce global GDP by up to 7%, and in the best case, it could reduce global GDP by 0.2%.
Meanwhile, according to analysts, during Mr. Trump's presidency, tariff policies, trade "wars" and tax cuts, combined with immigration restrictions could create an "uncomfortable" situation for the world: inflation in the US increases again, but the USD remains strong, spreading inflation globally.
This is a bad scenario because it creates price instability for developing countries, while they also struggle to keep their currencies stable and not let them depreciate rapidly against the US dollar. “Central banks will have a much harder time under Mr. Trump,” wrote Chris Anstey and Catarina Saraiva in a recent article on Bloomberg.
A few hours later, the US Federal Reserve (Fed) decided to cut interest rates by another 0.25%. This was an expected interest rate cut and was in line with the expectations of most experts, and also in line with what Mr. Trump wanted (lower interest rates, lower taxes to support the economy).
These “honeymoons” will soon pass, especially when US tariffs put pressure on economic growth and inflation. At that time, will the Fed have to cut interest rates to support economic growth, or keep them steady for fear of a return of inflation?
In such a context, what can emerging markets do to defend themselves? They have neither China nor the EU to “retaliate” against the US.
For Vietnam: Internal strength is the key to growth
As an emerging market, if the trade war between the US - EU - China takes place, Vietnam will fall into a complicated spiral. Will multinational companies choose Vietnam as a "storm shelter", moving production to Vietnam to avoid high taxes in China? It is possible, but not as certain as in the past.
The reason is that Vietnam is also in the US's "crosshairs" of tariffs, and even the story of being "designated" as a "currency manipulator" may return. We all understand that it is just a tool to demand agreements from Vietnam to reduce its trade surplus with the US. However, those moves still put pressure on trade and investment, and only strong internal strength combined with economic reform can help Vietnam stand firm against the pressure.
The “capital” for negotiation must come from internal strength, from reducing dependence on foreign direct investment. How to make Vietnamese enterprises stronger and more resilient is the key to answering the question: “What should we do if a trade war breaks out in the near future?”
Internal strength is the key to success and also the "capital" for negotiation.
Source: https://baodautu.vn/ong-donald-trump-tai-xuat-nha-trang-thi-truong-hung-phan-va-ap-luc-trong-trung-han-d229667.html
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