Investing.com -- The re-election of Donald Trump is set to further accelerate deglobalization and economic fragmentation globally, as analyzed by economists at Wells Fargo (NYSE:WFC).
This shift centers on Trump's commitment to heightened tariffs and an increasingly unilateral approach to U.S. trade policy, which could drive other countries to reevaluate and redirect their economic alliances.
As a result of recent financial crises, Wells Fargo points out that global trade cohesion had already deteriorated. A new round of U.S. tariffs is expected to aggravate the global economic fractures caused by COVID-19.
A Trump-led America could see the U.S. becoming more economically insular, raising barriers that hinder the flow of international trade.
Such protectionism signals to other nations a need to reconsider their economic dependencies on the U.S. and possibly align more closely with China.
In fact, during Trump’s first term, multiple nations began expanding their trade relations with China, both through economic partnerships and in their voting behaviors at international bodies like the United Nations.
A new era of increased tariffs under Trump may only serve to push more countries toward China's orbit, reshaping global trade networks and political alliances in the process.
One of the most impacted nations is likely to be China. Wells Fargo suggests that Trump’s tariff policies could act as a catalyst for a shift in China’s stimulus strategy.
Historically, China has directed stimulus into real estate and manufacturing. However, in a scenario where U.S. tariffs hinder China’s export channels, Chinese authorities might pivot towards stimulating domestic consumption instead.
This pivot could be an attempt to reduce reliance on exports in light of a more protectionist U.S. economy.
While this would mark a departure from China's traditional economic policies, it may become increasingly necessary in a fragmented global economy to maintain domestic stability and growth.
Trump's foreign policy is expected to adopt a more transactional stance, favoring pragmatic alliances over long-standing commitments.
His position on key alliances like NATO and his conditional stance on defending Taiwan suggest a future where U.S. foreign policy is dictated by immediate national gains rather than broader strategic goals.
This inward focus not only compounds the economic fragmentation but also increases geopolitical uncertainty, as allies and rivals alike may be forced to reassess their own security and economic policies in response.