EDITORIAL: Donald Trump’s return to the White House could not have come at a worse time for the Eurozone, just when fresh economic data is suggesting that the bloc’s growth has been slower than expected.
And now markets are going to factor in the “big price” that Trump promised to extract from Europe throughout the campaign, threatening to turn the deep industrial recession already weighing down the continent into a full-blown, proper recession.
The first in the firing line will be Germany, already in political turmoil after the sacking of the finance minister unravelled the government.
A 10 percent (or higher) hike in tariffs, as Trump has repeatedly promised, will send the continent’s largest economy into deep shock and confound its interest rate cutting cycle. There’s also the fact that tariffs are sure to invite counter-tariffs, as ECB (European Central Bank) Vice President Luis de Guindos pointed out at a conference in London immediately after Trump’s win across the pond.
“If you impose a tariff, you have to bear in mind that the other party is going to react, and it’s going to retaliate, and that could give rise to a vicious circle in terms of inflation, tariffs, which could be the worst possible result,” he said. Should prices turn higher once again and force a reversal of the interest rate cutting cycle, just when the whole continent is experiencing anaemic growth at best, there’s sure to be trauma in the jobs market as well.
And since Trump has also said he’d pull the plug on the Ukraine war “within 24 hours”, there’s much for European leaders to think about before the change of guard in Washington in early January.
That’s not all, of course, since global financial markets and capitals are bracing for more – and stiffer than last time – tariffs on Chinese goods as well. Beijing will employ tariffs of its own, and another tariff and currency war is now inevitable.
That’s why there is considerable weight in the odd voice cautioning against a repeat from a century ago, when US policymakers were wrongly convinced that protectionism was the one sure path to high growth; only to end up inviting the great depression across the world and the rise of Adolf Hitler in Germany.
The world is also very anxious about the future of Israel’s genocidal war in Gaza. The Biden administration won few friends in the region because of its failure to rein in the Netanyahu government’s bloodlust, but it still kept the Israelis from directly attacking Iran’s oil and nuclear infrastructure.
The president-elect, on the other hand, has openly called for “finishing the job”, which means it’s not just financial markets that can turn red-hot during Trump’s second presidency, but also the most volatile region in the world for almost three quarters of a century.
Countries like Pakistan will not be immune from the fallout of such a rapidly changing world, even though few expect direct interactions to be any different than with the outgoing administration in Washington. The region’s dynamics could still change to Islamabad’s disadvantage, though, as the US looks to bolster India further as a counterweight to China. That’ll only add to Delhi’s arrogance and the distance the Modi administration likes to keep with Pakistan.
In choosing Donald Trump over Kamala Harris, American voters have given leaders and people across the world over plenty to worry about. It’s now for the Trump team to figure out just how far they want to go back to the tough talk from the campaign trail. After all, not all plans that fetch votes work out well in the real world. And needlessly stoking tariff wars and actual wars is hardly what the world needs in these tough times.
Copyright Business Recorder, 2024