By Vaibhav Tandon

In sport, play is limited by time or innings. Lineups are set, rules are fixed and boundaries are defined.  Winners are determined objectively. 

Commerce and politics operate differently. Players come and go, the rules are changeable and the clock never stops.  It is much harder to identify victors in these arenas.

The lineup in Washington will be changing next year.  Other players around the globe will be challenged to adapt their tactics to the new roster, and the new rules they will try to enforce.  Following is a look at how selected countries and regions may fare under a second Trump administration.

Europe

The European continent is extremely vulnerable to Trump’s agenda, owing to close commercial and national security linkages with the United States.  The most immediate economic worry will be tariffs, as the incoming president seeks to close the €155 billion trade deficit with the eurozone; he has threatened a blanket 10% to 20% levy on all imports.  Germany, Italy and Ireland are among the most vulnerable due to their high export volumes to America.  Germany’s struggling auto sector will be top of the list.

The implications for the U.K. economy will also be significant.  America is Britain’s most important bilateral trade, security and defense partner.  Industries like pharmaceuticals, medical goods, automotive and liquor would be particularly exposed to new U.S tariffs.

Trump’s trade agenda, if implemented to the fullest, will likely deliver a hit of anywhere between 0.6% to 1.1% to real gross domestic product (GDP) across the European continent, according to Goldman Sachs.

The trade deficit is not the only elephant in the room.  European nations will come under increased pressure to decouple from China.  The incoming president could impose counter-measures against European digital services taxes and states that have implemented the Organization for Economic Co-operation and Development’s global minimum tax, as it is seen to disadvantage American corporations. 

The President-elect also wants all the European states to meet the defense spending targets required of North Atlantic Treaty Organization (NATO), threatening withdrawal of U.S troops and weapons.  Out of the 32 NATO allies, seven European states are unlikely to meet the 2% of GDP spending target in 2024, including Italy and Spain.

Asia Pacific

China is bracing for an unstable and unpredictable path ahead, at a time when its economy is struggling to return to pre-pandemic levels of growth.  During Trump’s first term in office, goods from China faced tariffs of as much as 25%.  Proposed tariffs as high as 60% on Chinese imports, along with more technology controls, would decimate Chinese trade with the U.S.

Escalating trade disputes will significantly hurt corporate confidence and capital expenditures.  Seven years of trade tensions have allowed mainland businesses to diversify, and America has also reduced its dependence on Chinese products.  However, shrinking external and weak domestic demand will further exacerbate deflationary pressures.

The looming trade war could set in motion the steady decline of China’s decades-old manufacturing and export growth model.  Global supply chains will come under scrutiny as the Trump administration will also likely target Chinese goods being rerouted to the United States through other markets. 

Beijing could retaliate by targeting U.S. farm products, blacklisting American corporations and restricting access to essential materials like rare earth metals.  However, in order to offset tariff costs, Chinese policymakers will have to weaken the renminbi, increase export tax rebates and implement more stimulus.  An unprecedented scale of currency depreciation will be required to mitigate the higher levies.  According to Morgan Stanley, factoring in tariffs already in place since 2018, the renminbi would need to fall by 50% against the dollar to keep U.S. import prices stable.  

The Australian economy will not be immune from repercussions from the U.S. election, as it shares close commercial ties with both China and the United States.  About 97% of Australian imports into the U.S. are currently tariff-free, thanks to a free trade deal signed in 2004.  Beyond the shock of potential new tariffs, Australia could be collateral damage of a renewed U.S.-China trade war.  Weaker demand for Chinese goods would diminish demand for Australian input commodities like iron ore.  If all of Trump’s policies are implemented, Australia’s economic growth would be between 0.8% and 1.5% lower than it would otherwise have been, according to an analysis by KPMG.

North America

Few nations are as closely tied with the U.S. as Canada and Mexico, with supply chains deeply integrated and continental trade flows exceeding a trillion dollars annually.  Trump's promise of universal 10% tariffs raises worries across this network. 

Canada exports 75% of its goods to the U.S., with energy, autos and other heavy manufacturing industries among the top export products.  These industries rely on its southern neighbor for raw inputs and as a market for finished products.  Any retaliatory tariffs from Canada are only going to compound the pain of these businesses, in the form of higher input costs.  Increased American oil production and weaker demand from China would weigh on the Canadian energy industry.

The Trump administration could spell even bigger trouble for Mexico, not only because of the large trade surplus it runs with the U.S.  The President-elect has warned to implement “whatever tariffs are required — 100%, 200%, 1,000%” to prevent imports of Chinese cars via Mexico and a blanket 25% tariff on all Mexican goods due to the flow of migrants through the country.

His administration is also likely to insist on modifications to the United States-Mexico-Canada Agreement, the deal he inked during his first term, when it comes up for review in 2026.  

As much as the President-elect would like to believe that the U.S. will emerge a winner from trade disputes, past trade conflicts have not worked to any nation’s benefit.  Losing the least may have to count as a win.