President-elect Trump has made four key economic policy proposals: increasing tariffs (a threatened 60% on China and 10-20% on the rest of the world), reducing or reversing immigration, decreasing taxes (an extension of the 2017 tax cuts and a reduction in corporate tax are likely), and reducing regulation (mainly in energy and financial industries).

These policies present headwinds to EMs. US policy is now highly unpredictable, however, and the reality might not be as strong as outlined during the campaign, especially on tariffs. During Trump’s first term in 2016, for example, the focus was initially on fiscal rather than trade policy and if this were to be the case again, it could be more positive than negative for certain EMs.

Global and local interest rates

Expansionary US fiscal policy and tariffs could both put upward pressure on US inflation. Cutting taxes without a reduction in expenditure boosts overall demand in the economy, which will generally raise prices (unless supply also increases) and can also lead to higher wages.

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