Gift for the 45th
Two consecutive events—a shooting at a campaign rally in Pennsylvania and the official nomination of the 45th President of the United States, Donald Trump, as the Republican Party's candidate—have caused significant upheaval in global politics and the economy. The main takeaway? The world anticipates increased protectionism from the largest economy and a more active shift by the EU towards bolstering its own security efforts.
The attempt on Donald Trump's life at the campaign rally has significantly boosted his election chances. While it's unwise to rely too heavily on betting odds to predict election outcomes, they are quite telling at the moment. In May, the odds of Trump winning on the betting platform Polymarket were 46%, compared to Joe Biden's 45%. However, within a day after the assassination attempt, these figures changed to 71% and 17%, respectively. By Tuesday, 16 July, they had reached 72% and 17%.
Another prediction betting service, Predictit, showed Trump’s chances at 60 cents per dollar payout on 12 July, which rose to 68 cents on 15 July after the attempt on his life. On 16 July, following the official announcement of Trump's candidacy, his odds were at 69 cents, while his opponent’s odds remained stable at 26 cents during these days.
With more than three months to go until the election, many things can still happen. There is a non-zero probability that the Democratic Party Convention at the end of August might nominate a different candidate instead of the incumbent president. Various legal proceedings involving Trump, where he stands as the accused, might also influence the campaign. However, these legal issues seem unlikely to hinder his progress in the election campaign. Additionally, these court cases could help Trump mobilise his voters for a stronger turnout at the polls.
Tomorrow, 18 July, on the final day of the Republican Party Convention, Trump is scheduled to give a speech, the theme of which he decided to change following the assassination attempt. According to his own statements, instead of criticising the current president, he plans to focus on calls for national unity, which should garner him new supporters.
Money Talks Loudly
Currently, the economy is leaning towards favouring Trump’s candidacy. An interesting indicator is the yield on long-term US bonds, which has increased in recent days, as the market assumes that Trump's actions might lead to further increases in national debt and accelerated inflation. Securities linked to cryptocurrencies are also on the rise, along with Bitcoin itself. Analysts believe that the markets are valuing Trump’s advantage as a candidate because he supports the crypto industry.
Expectations from Trump regarding domestic American issues include expanding domestic oil and gas production, strong measures to protect the domestic market, a tougher stance against aggressive Chinese exports, and protecting middle-class interests. The "Make America Great Again" project will be rebooted, especially since considerable progress was made towards reindustrialisation even during Biden’s term. For example, Biden signed the CHIPS Act, which encourages the return of not only the development but also the production of advanced microchips to the US.
This policy appeals to Trump’s campaign donors. As a result, he has been rapidly closing the gap with Biden in the second quarter, despite ongoing court hearings involving the 45th president. This comes at a time when Biden is facing some difficulties in communicating with major donors, although the overall amount of funds raised by him is impressive.
Ready for Triumph
Currently, a host of political and security experts are fiercely debating the implications of US-Brussels relations if Trump indeed wins. The greatest concern is the prospect of American isolationism. Trump has made quite stringent demands on European leaders regarding their responsibility for the security of Western European countries.
Additional worries in this regard are fuelled by the figure of Senator J.D. Vance from Ohio, whom Donald Trump announced as his running mate on 15 July. The 39-year-old Vance was first elected senator in 2023 and is known for his ultra-conservative views.
Vance is known for his rhetoric against aid to Ukraine. For instance, in December 2023, he called for an end to hostilities and to begin negotiations. This is despite the fact that recognising Russia’s territorial grabs in Ukraine opens Pandora’s box and signals a green light to other authoritarian regimes worldwide. Of course, the world is rapidly changing, and positions matter. But in April 2024, Vance had already harshly criticised NATO and Western European allies for their "insufficient" defence spending.
"For three years, Europeans have been telling us that Vladimir Putin is an existential threat to Europe. And for three years, they haven't acted like it was true," he stated. Vance specifically noted that Germany had not met the target of defence spending at 2% of its GDP, which is a requirement for all NATO members.
Trump, during his presidency, also criticised European partners for their desire to be "free riders" in the security alliance. But the situation has significantly changed now. Most NATO countries are meeting this target, although Germany still does not.
Therefore, if Trump is elected, he is unlikely to be able to criticise Europe for inadequate defence budgets, but he will probably continue to argue over customs tariffs on European goods. However, in the face of the colossal Russian military threat, trade disputes are not the biggest concern.