India Economy & Strategy - Trump’s Isolationism Forbode Dislocations While The South Consolidates: Systematix

Systematix Research Report

Market optimism surrounding a revitalized Donald Trump presidency hinges on the assumption of renewed capitalism and reduced war-related risks. However, the "Make America Great Again" slogan under Trump 2.0 represents a vigorous effort to strengthen America’s global dominance, reminiscent of the Gilded Age following the Civil War (1881-85), utilizing a mix of mercantilism and isolationism.

The ramifications of sidelining multilateralism could be extensive, as the proposed tariff levels resemble those before the Great Depression (1929).

Trump’s strategy promises a multi-decade expansion in U.S. productivity, increased industrial capital expenditure, a revival of manufacturing dominance, and a reduction of the public debt-to-GDP ratio from a record level of 123%, akin to what occurred after past peaks.

In this analysis, we explore the historical context of U.S. mercantilism and its likelihood of success in the current global landscape, particularly as the Global South gravitates toward China’s idea of Equitable Globalization. We will also examine the economic costs and benefits of Trump 2.0 for the U.S., G20, Emerging Markets, and India.

The implications of the Trump 2.0 risk-on trade approach are likely to persist until Trump potentially resumes the presidency on January 25. This will clarify the sequencing of his priorities, particularly concerning tax cuts, protectionism, and renewed fossil fuel policies.

The U.S. Federal Reserve's response to the Trump 2.0 policy reset will be critical, as will the reactions of China and other countries. Thus, beyond the short term, the market outlook remains uncertain.

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