Politicians are often criticized for their promises in an election campaign never making it into legislation. In the case of President-Elect Donald Trump’s return to the White House, the market is somewhat banking on it.
Trump’s economic policies were a hit with voters but drew more mixed reactions from analysts and economists. The winning candidate’s proposals for immigration and tariffs, in particular, prompted questions about how they would work in practice.
But experts now know that former President Donald Trump will be back in the Oval Office, as opposed to his Democratic rival, Vice President Kamala Harris. In the early hours of this morning, Trump was declared victor of the 2024 race, winning 277 of the 270 seats needed to clinch the role of commander-in-chief.
Markets were turbulent this morning as many analysts had held out on hitching their wagon to one candidate or the other.
As economists firmed up their view on another Trump administration, one thing became clear: They’re somewhat certain that the sharpest points of Trump’s mandate will not come to fruition.
Ahead of the election being called in Trump’s favor, UBS’s chief economist Paul Donovan wrote in an audio note obtained by Fortune: “Markets appear to assume that the campaign rhetoric (specifically around deportations and tariffs) will not fully translate into policy.
“The potential for market moves therefore depends … on any emerging signals about how dramatic those policies might turn out to be.”
Trump’s tariff plans include a 10% tax on all goods imported to the U.S. and a steep 60% duty on imports from China.
The politician has made it clear he wants to enforce the tax even on some of America’s greatest trade and political allies, such as Europe, saying the nations would have to pay a “big price.”
Trump has also said his administration will undertake “the largest domestic deportation operation in American history.”
In an interview with Time magazine, Trump said he plans to remove upwards of 11 million people by building migrant detention camps and deploying the U.S. military at the border and throughout the country.
Hopeful in Europe
As European markets woke up to the news of Trump’s victory, analysts were keen to frame the spectrum of outcomes if the politician’s proposals came to fruition.
Analysts at Goldman Sachs wrote in a note seen by Fortune that “renewed trade tensions [between the U.S. and Europe] are likely to weigh materially on growth.”
Assuming that European nations would match Trump’s 10% tariff with an equal one of their own, the economists found the GDP of the Euro area would fall 1%: 0.7% in the U.K., 1.1% in Germany, 1.1% in Sweden and 1% in Switzerland.
That said, Goldman said its baseline expectation is for a more limited set of tariffs on Europe, including on autos-related imports worth $80bn, which account for 0.9% of E.U. exports.
“We again assume one-for-one retaliation by the EU, but even then the economic effects of the tariffs are likely to be limited,” the analysts continued.
At JPMorgan, analysts are also hearing that Trump’s policies won’t be implemented as quickly as the politician might have alluded to.
Experts from America’s biggest bank met with policymakers and economists—as well as Trump advisors—in late October during the IMF/World Bank Fall meetings. In a note seen by Fortune, they wrote: “Trump advisors outlined a gradual phase-in of tariffs to allow corporates to adjust operations and allow other countries time to reconsider and negotiate.
“There was discussion of reciprocal tariffs where U.S. goods are disadvantaged abroad relative to foreign country goods entering the U.S. versus outright punitive tariffs.”
