Donald Trump returns to the White House. After several days of high expectations in financial markets internationals, what was expected was finally confirmed, although with a greater advantage than expected: a resounding victory for Donald Trump over Kamala Harris. Trump’s victory generated immediate reactions in the markets with strong increases in US equities and an immediate appreciation of the dollar against other currencies. What scenario opens up from now on?
The victory of Donald Trump would seem like a victory for the wishes of Javier Milei and Luis Caputo, who hope for a better room for maneuver when negotiating with the International Monetary Fund (IMF). Furthermore, the ideological closeness between Trump and Milei could be beneficial because Argentina is a strategic ally for the region and eventually maintains a positive effect on the trade balance. It is worth remembering that the US is one of the five most important trading partners for Argentina with exports of US$489 million (according to the latest official data).
However, the devaluation of the real could put limits on that expectation. For Argentina, it implies a loss of competitiveness compared to Brazilian products that are becoming more attractive.
Beyond this factor, a strengthened dollar and rising interest rates impacts emerging economies and could put more limits on optimism.
From EcoGo’s perspective, the immigration controls proposed by Donald Trump would marginally raise wages, which in turn would keep inflation higher. Given this, the Fed could be prompted to prematurely pause the rate reduction cycle that impacts the cost of money. For the price of commodities, in the long term They expect a drop in oil prices and also in the price of soybeans. This would negatively affect two of the commodities where Argentina makes a difference in accumulating reserves.
Donald Trump in the White House: the impact on emerging markets and country risk
With a pessimistic perspective, Jorge Compagnucci, content director at Target Market Global (TMG), said: “Trump’s triumph is panic for the emerging world. What the market shows you today is going to be the characteristic currency of the next 4 years, which is blowing up the dollar, that Milei forgets about dollarization because the conditions are not met regarding the vulnerable debt situation that Argentina has. It is the debt that is going to sink Argentina and the rest. of the region”.
For his part, the Economist Maximiliano Suárez consulted by Scope, stated in this context, that although the macro is still fragile for Argentina, “it will be key for the economic team to be determined and calm as it did in other episodes of stress not so distant (for example the August sell off due to the BOJ rate hike). And that, of course, accompany it with concrete actions that ratify the path of fiscal balance and monetary sobriety,” he explained.
As for the US, the prospects of a larger fiscal deficit due to tax cuts and higher inflation due to the imposition of tariffs are putting upward pressure on Treasury bond yields, “and puts pressure on the Argentine debt, which has been performing very well lately. “We can see some temporary rise in the country risk,” advancement.
News in development.-
Source: Ambito
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