蜜豆视频

Podcast: Jump Start 鈥� China growth, US, and Eurozone inflation data (4:53)

Podcast: Investors Club: 蜜豆视频 Chief Economist Paul Donovan on inflation and tariffs (21:52)

Donald Trump is set to be sworn in later today as the 47th President of the United States, and his policies look likely to reshape the global economic and geopolitical landscape. As investors await the first announcements from the new administration, his pick for Treasury secretary, Scott Bessent, has offered a glimpse of President Trump鈥檚 agenda during his first days in office.

At his Senate confirmation hearing last week, Bessent touched on issues ranging from the US dollar鈥檚 status as the world鈥檚 reserve currency to the independence of the Federal Reserve, fielding questions that spanned child tax credits and tariff impacts on farmers. We discuss several topics that are likely to move markets in the coming days and weeks.

Tariffs are likely to be implemented on US imports, mainly targeting China. It is well known that tariffs are high on Trump鈥檚 policy agenda, having already threatened tariffs on China, Mexico, Canada, and the BRICS countries since the election. While markets expect a more pragmatic approach with Bessent heading the Treasury, he voiced support for Trump鈥檚 plans to impose tariffs at the hearing, saying they would combat unfair trade practices, raise revenues, and increase US negotiating leverage, including on non-trade issues. Official announcements remain to be seen, and selective tariffs could still have significant impact as they get imposed over time. But at this stage, we do not expect tariffs to derail the US economy鈥檚 growth momentum鈥攖hough they will likely impact individual sectors and countries. Blanket universal tariffs are less likely, in our view, because of the higher cost to the economy and financial markets, which could prompt opposition in Congress.

On China, we expect a phased increase in the effective US tariff rate on Chinese goods from 10% currently to 30% by end-2026. China will likely respond in an asymmetric, measured, and reactionary fashion to US tariffs, including the use of tighter export controls on critical minerals, sanctions on US entities, moderate yuan depreciation, and concessions. We also expect China to give more clarity on its fiscal stimulus at the National People鈥檚 Congress in March.

Congressional constraints may limit the scope of fiscal policy. Referring to it as 鈥渢he single most important economic issue of the day,鈥� Bessent highlighted an urgent need to extend Trump鈥檚 2017 individual tax cuts. He said the US 鈥渨ill be facing an economic calamity鈥� when they expire at the end of this year and lead to 鈥渁 gigantic middle class tax increase.鈥� We think the Trump administration will manage to extend the temporary tax relief policies, but it will likely stop short of lowering corporate taxes given the elevated level of the federal deficit and the narrow Republican majority in Congress. We continue to think that congressional objections to larger budget deficits may limit the administration鈥檚 ability to pursue an expansionary fiscal agenda, therefore limiting fiscal sustainability fears that could push up long-dated US government borrowing costs.

Geopolitical landscape may be reshaped with fresh sanctions. Supply concerns have increasingly worried the oil market in recent weeks, especially after Washington鈥檚 fresh sanctions against Russian oil earlier this month. At the confirmation hearing, Bessent said that US sanctions against Russia鈥檚 oil sector have been too weak, and that he stands ready to impose tougher sanctions 鈥渢o levels that would bring the Russian Federation to the table.鈥� Given the solid compliance levels from OPEC+ producers, potential sanctions on Iran, and falling crude oil inventories in developed nations, we see upside risks to our near-term oil forecasts and continue to see value in selling the risk of falling crude oil prices. We also see increased prospects for peace talks between Russia and Ukraine despite the challenging nature of reaching a lasting resolution, following the six-week ceasefire deal between Israel and Gaza that went into effect on Sunday.

Market volatility is set to pick up as Trump 2.0 begins, but we think the macroeconomic backdrop remains favorable for financial markets. The solid US economy bodes well for corporate profits, the Fed remains on an easing path, and AI investment and monetization should continue to support sentiment. We rate US equities and quality bonds as Attractive, and believe gold and select hedge fund strategies (like global macro funds) remain appealing portfolio hedges amid uncertainty.