The Donald Trump’s victory It occurs in a context of both internal and external complexity. The world has changed substantially since he left office in January 2021: Ukraine and Russia they went to war, the conflict in Middle East escalated to its highest levels of tension in years and the power of USA It seems to have been diluted. In the domestic sphere, inflation (uncontrolled by North American standards) resulting from the monetary financing of US Treasury spending, damaged social well-being and was probably the main reason that returned it to the White House. Return that seems to have two mandates: order the domestic economy, and order foreign policy.
In order to infer what will happen in the coming months, we must first analyze the economic situation in the United States. The latest inflation data suggests that it is slowly landing on the 2% target, unemployment is around 4% and the economy continues to grow. Last year, GDP expanded by 2.9% and in 2024, although a certain slowdown is expected, it would grow by close to 2%.
However, inflation in recent years eroded the purchasing power of wages; a phenomenon that the younger generations had never experienced and that took them by surprise. Consequently, A demand was raised by North American society to solve this issue urgently.
Furthermore, the growing fiscal deficit and a public debt that represents 120% of GDP mark an unsustainable path that will force the incoming administration to make reforms in order to preserve the dollar credibility in the world and not lose credit rating, a milestone that would destabilize the financial world as we know it today.
Faced with this panorama, the Trump government’s economic program should focus on moderating spending and returning it to a level, at least, similar to what it was before the pandemic. This will align in turn fiscal policy with monetary policy. And it will allow the rate cut that the Federal Reserve began to continue.
What impact does Donald Trump’s victory have on the Argentine economy?
thinking about Argentinathe trump victory seems to have printed some optimism for Argentine assets; he country risk broke 900 points again and the Merval It showed a daily increase of 4% although it closed with a more moderate variation.
For his part, the official exchange rate remains anchored with the crawling peg 2% monthly and, in any case, the impact on financial exchange rates could be analyzed, which in any case did not see the depreciation of the peso, but rather maintained its downward trend.
Like everything in economics, there are some of lime and others of sand. Trump’s return also fueled a recovery of the dollar in the world, which strengthened 1.7%. On the other hand, raw material prices fell.
Among the most controversial points of the economic policy of the Republican government is the tendency towards protectionism. In his previous term, The increase in tariffs on imported goods was a characteristic reviled by defenders of liberalism and typical of a government with a greater nationalist tinge.
However, this decision has more to do with its confrontation against China and company than with an economic decision. In this sense, it is true that continuing with this feature of his previous mandate could open the door to a new geopolitical conflict, in an already convulsed world.
However, it is to be expected that the United States will want to remain calm, at least with the countries it has the greatest influence on.. Here the role of the international agenda proposed by Argentina comes into play, which, being aligned with the North American country, could be functional for it and could even increase the trade flow between both countries.
Not only that, proximity to the Trump administration could facilitate access to international financing, particularly through the IMF. However, this is only viable thanks to Argentina’s recent performance in meeting the goals set with the organization, which has allowed it to consolidate its position at the negotiating table in search of fresh dollars. The key is that a good relationship with the new administration in the White House could pave the way for future negotiations, reducing resistance from USA to the approval of additional disbursements. This would be essential to sustain the country’s financial stability, considering the profile of debt maturities in dollars for the coming years.
Trump won: what will happen to the dollar?
In short, Trump’s return to the White House will give greater oxygen to the US economy, with a possible appreciation of the dollar, but in a context where the economy is quite far from its maximum splendor and presents internal challenges that are not insignificant.
For its part, the Argentine economy is in an advanced stage of stabilization and laying solid foundations that will allow it to overcome obstacles that it would not have been able to achieve in another situation. It is true that an eventual exit from the stocks leaves the country more exposed to changes in the world, but it must also be clear that by keeping the public accounts in order and with a solid monetary policy, there should be no need to be afraid.
The world’s financial cycle will cause a new search for yield outside of Treasury bonds, the local market will have to be noticed to channel that flow and to do so it will be necessary to eliminate capital controls.
In short, There are several key aspects that can enhance the growth and development of the Argentine economy in the face of Trump’s victory.. But for this to happen, the signals that the government must send are clear regarding its unwavering commitment to generating solvency to honor its obligations, as well as to eliminate capital controls so that the local financial market can flourish.
Economist at the Libertad y Progreso Foundation.
Source: Ambito
