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A red wave swept over the USA on 5 November 2024 as the Republican Party under former president Donald Trump won the presidential race and claimed a majority in both houses of Congress.

If Trump’s campaign rhetoric is to be believed, then his return to the White House will bring with it a renewed commitment to protectionism, an upheaval of trade norms, and significant implications for economies worldwide. 

To discuss these potential implications and explore how a second Trump presidency will reshape global trade, finance, and geopolitical dynamics, Trade Finance Global spoke with Rebecca Harding, Economist at Rebeccanomics; Robert Besseling, CEO at Pangea Risk; Alisa DiCaprio, former Chief Economist at R3; and Simon Everett, Trade Policy Expert on the day the results were announced.

A rising tide of protectionism and its ripple effects on trade finance

Throughout the 2024 presidential race, Trump campaigned heavily on the promise of putting American workers and industry first by imposing sweeping protectionist tariffs on goods entering the country. 

DiCaprio said, “The first big shift under a second Trump administration is around more restrictive tariffs for everyone. The campaign has suggested 10 to 20% tariffs on all imports, as well as increased enforcement of trade rules. So we’re going to see trade become much more restrictive.”

For some foreign businesses that rely on US markets to sell their products, these campaign promises, should they materialise, will introduce considerable strain on their margins and may require them to rethink their entire approach to global commerce. 

Everett said, “Companies exporting from those countries would be well-advised to consider what alternative plans they have for supplying the US market should trade tensions deteriorate.”

Companies dealing in low-value imports, in particular, will face steep hurdles due to stricter de minimis limits, effectively increasing the costs of doing business with the US.

But it’s also important to remember that just because something was promised on the campaign trail, doesn’t necessarily mean that it will become policy once the new administration takes power. 

DiCaprio said, “Even though the campaign says that there is going to be all these restrictions, Congressional Republicans are likely to moderate his most extreme proposals. Not the direction, but certainly the magnitude. So it remains to be seen exactly how these will play out.”

Harding added, “There’s also an extent to which he won’t necessarily use all of these measures. Some of them, because he’s transactional, will be used as bargaining chips.”

Regardless of what extent the campaign rhetoric materialises into actual policy, Trump’s election has already and will continue to have on the ground implications on how business is conducted in and around the US – including for the trade and supply chain finance industries.  

Supply chain finance may experience an increase in demand as businesses look to reorganise their supply chains and require assistance to cover the capital investment that will entail.

On the trade finance side, demand may be about to decrease. The types of transactions in the US that use instruments like letters of credit are often conducted between an American firm and either one in an emerging economy or a new exporter. These will be the types of businesses most negatively impacted by rising tariffs. 

A battle for control over commodities and currencies

The competition for economic dominance extends beyond trade policies to the critical resources that underpin modern economies. Trump’s election is likely to reshape commodity markets through a renewed focus on fossil fuels, heightened trade fragmentation, and changes to the value and use of the US dollar. 

His administration’s strong support for oil and gas development positions the US to play a more dominant role in global energy markets. Potentially, these resources could be used as leverage in geopolitical negotiations and within commodity markets.

Harding said, “We are seeing trade fragmentation and the separation of the critical mineral supply chains. All of those types of things will affect our transition, and we’re going to see a much more complicated commodities picture in the years ahead.”

By prioritising traditional energy over renewables, the US could alter supply dynamics and create volatility in pricing. At the same time, the fragmentation of global trade, driven by protectionist policies, could disrupt the flow of commodities and force regions to reconfigure their trade networks. This shift may further complicate the movement of critical resources, amplifying uncertainties for businesses and economies worldwide.

And then there is the role of the greenback.

Besseling said, “A stronger US dollar seems to be the outcome of a Trump administration, and that will have an impact in terms of global trade tensions… and may also inflate the borrowing costs for many countries in emerging markets, like in Africa and Asia.” 

Higher borrowing costs amplify existing debt crises, compelling these economies to explore alternatives. That’s why initiatives like BRICS Pay and local currency trade systems are gaining traction as nations look to bypass traditional reliance on the dollar. 

These movements underscore a growing desire among emerging markets to assert greater independence and resilience in an era dominated by economic uncertainty.

Besseling added, “The BRICS Club is expanding. We’ve got more partners across emerging markets now joining the BRICS organization. Similar, we’ve seen these emerging markets seeking alternatives to make trade happen in local currency, pushing ahead with a local currency clearance system called BRICS Clear.”

While much remains to be seen in the world order, it seems that there is at least a growing interest, and now perhaps even need, among the nations of the world to find alternatives to a US-centric system.

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A second Trump presidency signals a return to protectionist measures and unilateral decision-making. From the restructuring of supply chains to the shifting balance of power in commodity markets, businesses and governments alike must brace for significant change. 

The ripple effects of these policies, should they come to fruition, will test the resilience of existing systems and drive innovation in trade, finance, and geopolitics.