Donald Trump wins: What impact could it have on the U.S. economy?

Republican candidate and former President Donald Trump has defeated current Vice President Kamala Harris in the November 5th presidential election. International markets have responded positively to Trump’s victory, and Alberto Matellán, Chief Economist at MAPFRE Inversión, explains that investors typically reward the end of uncertainty during major events like this. However, Matellán also highlights that many of Trump’s economic policies are growth-oriented.

These policies can be categorized into four main areas: taxes, tariffs, deficit, and regulation. Matellán points out that while these measures may benefit U.S. growth, they could have negative consequences for other regions, such as Europe. “There’s a lot of noise around the belief that tariffs will be very harsh, and it’s true that Europe is one of the most open regions in the world. But we need to see how these tariffs are implemented and remember that Europe’s growth issues are largely driven by internal factors, independent of U.S. tariffs,” he explains.

Moreover, the implementation of these policies may not be as severe as advertised. “One thing we saw between 2016 and 2020 was the difference between the economic policies announced and those that were actually implemented. In practice, they were often more moderate,” he notes.

The MAPFRE Chief Economist also adds that Trump’s economic measures are not drastically different from those of Democrat Kamala Harris. “For at least the past 15 years, U.S. governments—regardless of party—have been urged to reindustrialize the country. This is a long-term trend that can be addressed in various ways, and it won’t change with Trump or any other president. While certain policies may warrant interesting analysis, the global trend of reindustrialization will likely remain unchanged,” he believes.

Federal Reserve (Fed) rate decision

The Fed made its decision during its meeting on November to lower interest rates by 25 basic points, to a range between 4.5% and 4.75%, two days after the election. Despite the close timing, Matellán emphasizes that interest rate decisions should be driven by economic conditions and risk management, not by the election outcome. He does not believe the result will influence this decision, nor does he think the change in the administration will lead to a shift in the Fed’s leadership.

However, over the long term, it could lead to changes, as Trump’s policies are more inflationary. If inflation rises, the central bank might opt to raise rates again. “The Fed operates independently of political power. While a change in president may generate media attention, it would be difficult to justify decisions without a solid macroeconomic foundation,” Matellán argues.

Decline in the Spanish stock market

Although international investors have responded positively to Trump’s victory, the Spanish stock market saw significant losses the day after the election. Matellán highlights the unique characteristics of the financial sector and notes that Spain’s largest banks have considerable exposure to Latin America.

“There are those who logically argue that a stronger dollar—a direct consequence of Trump’s victory—could harm Latin America. Spanish banks are highly exposed to the region, which makes this a reasonable and direct concern. While other factors may play a larger role, this is a key element,” he explains.