Explained: Impact Of Donald Trump's White House Return On World Economy

Donald Trump's return to the White House with his protectionist policies poses threats for the global economy, with the prospect of new trade wars, resurgent inflation and slower growth, experts say.

Global trade threatened?

During his first term in office from 2017 to 2021, Trump often resorted to punitive tariffs in disputes with trade partners.

In this 2024 campaign, he pledged to impose an additional 60 percent import tariff on Chinese products and an extra 10 percent tariff on products from the rest of the world.

Taking into account the probable retaliatory measures from Beijing and Brussels, the impact on the European Union economy will be $533 billion through 2029, $749 billion for the United States and $827 billion for China, according to a study by the Roland Berger consulting firm.

A separate study by the London School of Economics estimated that the impact on emerging market nations such as India, Indonesia and Brazil would be much less.

Jamie Thompson, head of macroeconomic forecasting at London-based Oxford Economics, said he sees little shot-term economic impact due to the delays in implementing policies, but they could be positive for growth.

"While the outlook for 2025 is essentially unchanged, global growth is likely to be a little stronger in 2026 and 2027 on the back of the election result, as the impact of looser US fiscal policy more than offsets the drag from targeted tariff measures," he told AFP.

But if across-the-board tariffs are imposed it "could leave the global economy around 0.75 percent smaller -- and global trade down some three percent -- by the end of the decade," he added.

The prospects for international cooperation, which can boost trade and growth, will also be dimmer under a second Trump administration, said Tara Varma, a visiting fellow at the Brookings Institution, a US think tank.

"The multilateral world of the 1990-2000s will no longer exist," she said, adding that she anticipates a brutal change in US policies.

A surge in inflation?

Donald Trump's policies could also rekindle inflation, which cooled following a series of interest-rate hikes that the Federal Reserve began to unwind this year.

The Peterson Institute for International Economics, a US think tank, estimated it could add between two and four percentage points to China's inflation rate.

The impact of "immigration policy is as important as global trade" on inflation, noted for his part Gilles Moec, chief economist at insurer Axa.

If Trump follows through with talk of a massive expulsion of unauthorised immigrants it could aggravate the labour shortage in the United States.

The Pew Research Center estimated that 8.3 million unauthorised workers could be affected.

The Peterson Institute for International Economics estimated this could add more than two percentage points to the US inflation rate next year, 0.2 percentage points in Europe and 0.6 percentage points in China.

Moec noted the surge in inflation would force central banks to hit the brakes on the cycle of interest rate cuts they began earlier this year as inflation subsided.

Analysts had been looking at lower interest rates to spur consumers to spend and companies to invest and put some more wind into the sails of the global economy.

Trade war to snuff out growth?

The trade war that Trump has threatened to wage against China risks sapping global growth.

Asia accounts for 60 percent of global growth, but would be hit hard by a trade war between the United States and China, the International Monetary Fund warned earlier this month.

The United States has also been one of the fastest growing developed economies but Trump's policies risk shaving two percentage points off US GDP per year between 2027 and 2031 from baseline estimates, according to a forecast from the Peterson Institute.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)