Trump Wins 2024 Presidential Election

Investing.com– Donald Trump is set for a second term after winning the 2024 presidential election. CLSA analysts state that his protectionist policies and plans for local tax breaks could present headwinds for stocks in the Asia-Pacific region.

Hardline Stance on China

Trump is broadly expected to adopt a hardline stance on China, having vowed to impose a 60% tariff on all Chinese imports. Beyond China, he has proposed increased duties on all imports to the U.S. According to CLSA, this could damage the growth outlook for APAC, especially for countries with high export exposure to the U.S., which include Taiwan, South Korea, Japan, and Malaysia.

Impact on U.S. Economy

Trump’s trade tariffs are also expected to dent the U.S. economy, particularly if trading partners impose retaliatory tariffs. CLSA estimates this could knock 1% off U.S. GDP by 2026 and raise inflation by 2 percentage points in 2025.

Fed Easing Cycle

Trump’s inflationary agenda is expected to stem the Federal Reserve’s current easing cycle, supporting the dollar and affecting regional currencies. However, this trend may benefit export-oriented companies with high U.S. exposure.

History of Trump’s Policies

CLSA noted that Trump’s tax cuts and jobs act during his first term contributed to ending a strong run in emerging markets from 2016 to 2018. The initial tax cuts spurred strong growth in U.S. corporate earnings, diminishing the appeal of EM earnings and causing underperformance in EM equities.

Trump has proposed an additional corporate tax rate cut to 15% from 21%, although this is contingent on Republicans securing majorities in both levels of Congress.

Potential for Arms Race

CLSA also noted that any withdrawals of U.S. commitments in Asia under Trump could spark an arms race in the APAC region.

Market Reactions

Stock markets in Asia reacted positively to Trump’s election victory this week, as it cleared a significant point of uncertainty for risk-driven markets. However, their trajectory remains uncertain, especially given Trump’s inclination towards protectionist policies.