In the recent International Monetary Fund (IMF) and World Bank annual meetings in Washington, discussions primarily focused on low growth, high debt, and ongoing global conflicts. However, significant attention was also given to the potential implications of Donald Trump possibly regaining power in the upcoming U.S. presidential election in November.
Finance leaders, central bankers, and civil society groups expressed concerns regarding Trump’s rise in recent polls, which has diminished the lead of his Democratic rival, Vice President Kamala Harris. The concern centers on Trump’s possible impact on the global finance system, including significant tariff increases, substantial new debt issuance, and a reversal of efforts to combat climate change in favor of increased fossil fuel production.
Kazuo Ueda, Governor of the Bank of Japan, noted widespread concern about the uncertainty surrounding the next U.S. president and potential policy changes. Another central banker, choosing to remain anonymous, hinted at an increasing belief that Trump might win the election.
Trump has proposed imposing a 10% tariff on imports from all countries, with a 60% duty on imports from China. These measures could disrupt global supply chains, provoke retaliation, and escalate costs. German Finance Minister Christian Lindner indicated that a U.S.-EU trade war would yield no winners.
While Trump promises multiple tax breaks aimed at U.S. voters, resulting in an estimated $7.5 trillion increase in U.S. debt over a decade, Harris is perceived by financial officials as likely to extend President Joe Biden’s policies focusing on multilateral cooperation. Her plans are expected to increase debt, but less so compared to Trump’s proposals. Harris supports Biden’s existing tariffs, and criticizes Trump’s broad tariff plans as imposing a consumer tax on American families.
Financial markets have begun favoring “Trump trades” due to his improved poll standings, seen in rising stocks, bitcoin, and the Mexican peso. The U.S. dollar has experienced its most significant monthly gain in over two-and-a-half years, with analysts attributing over half of the increase to Trump’s improved prospects. Monetary strategies under both Trump and Harris are expected to carry inflationary aspects, as highlighted by Brazil’s central bank chief, Roberto Campos Neto.
The discourse regarding Trump’s potential impact on trade and spending coincides with the IMF’s recent declaration that the fight against global inflation has largely succeeded without considerable job losses. IMF Managing Director Kristalina Georgieva emphasized the need to address COVID-induced debt to avoid a low-growth future, stressing that the membership’s focus is to tackle existing economic challenges.
Emerging markets have concerns about potential amplified U.S. deficits under Trump’s presidency, which could lead to increased long-term rates and a strong dollar, as noted by Turkish Finance Minister Mehmet Simsek. Such a scenario could negatively impact emerging markets, challenging the central banks globally if a retaliatory trade war ensues. South Africa’s central bank governor, Lesetja Kganyago, voiced concerns over the potential disinflationary impact of global tariff responses.
Saudi Arabian Finance Minister Mohammed Al-Jadaan, chairperson of the IMF’s steering committee, stressed the importance of continuing dialogue with both Republican and Democratic U.S. administrations, a sentiment widely echoed during the meetings. Angolan Finance Minister Vera Daves de Sousa expressed optimism, viewing challenges as opportunities for reorganization and learning.
This report was compiled by David Lawder and Karin Strohecker, with additional contributions from Leika Kihara, Marcela Ayres, and Maria Martinez. Editing was overseen by Andrea Ricci.