New Trumponomics
The world is indeed transitioning into a new mode of existence. Everything will happen much faster than large bureaucracies and autocracies are accustomed to. This is evident from Donald Trump’s speech in Davos. It was partially predictable back in November when we outlined the seven key trends for 2025: the rapid expansion of artificial intelligence, the dizzying proliferation of unmanned systems, a surge in the conscious use of genetic engineering, the crystallisation of two antagonistic worlds—authoritarian and democratic, the expansion of the nuclear club, an explosion of social phobias in response to the threats of low-cost terrorism, and a reset of the EU. We continue to consider all these trends relevant, but additional ones are now emerging: the competition to reduce energy costs, the suppression of aggressive autocracies, total deregulation, and a shift towards cheaper money in G7 countries. We should also expect an increase in economic self-interest among all those who dare to embrace it, particularly among key economic players.
In his virtual address to the gathering of global elites at the World Economic Forum in Davos, Donald Trump, on his fourth day in office as President of the United States, declared a golden age for his country.
Having secured support in seven so-called swing states, he believes he has a mandate for the most radical decisions—and that these decisions will be backed. He has also secured a majority in both chambers of Congress. While this does not guarantee unconditional legislative support, it comes close.
The central pillar of his agenda, which he hopes to advance triumphantly, is the so-called "common sense revolution." He aims to achieve not only strengthening, prosperity, and unity within the United States but also a more stable world overall. It may be hard to believe, but this could become a reality, as the world has ventured too far into leftist experiments and indulgence towards autocratic regimes.
This cocktail of leftist intentions and hybrid attacks by autocracies has created a genuinely explosive mix. The world is already beginning to burn in places. It is widely and justifiably believed that Russia’s full-scale invasion of Ukraine, now in its third year, is the embryo of a Third World War. This embryo could grow into a full-fledged global conflict unless civilised nations exert enough effort to extinguish it at its root.
All the world’s autocracies—from the largest to the regional—are watching this trajectory with anticipation. The outcome of this far-from-local war will shape their strategic choices. Will they don the mask of peace-loving nations from their infancy, or will they unveil their stockpiles of weaponry and begin absorbing their neighbours, both near and far?
What is Trump proposing in response? He is urging civilised nations to remember and reactivate long-established mechanisms of societal immunity. He calls for a return to meritocracy—rewarding individuals based strictly on their merits. He has expressed a willingness to embrace focused economic self-interest. This means protecting domestic markets, reducing taxes, and cutting government spending. The overarching goal is to enhance, or rather restore, the competitiveness of developed economies.
It appears that an excessive level of liberalism in the global economy has enticed many new players to attempt to hack the system.
The civilised world has proven incapable of resisting the expansion of corporations from autocratic nations, which have relied on direct state support and extensive subsidies for their economic decisions and achievements. Competing becomes extremely difficult when, for example, clothing and footwear manufacturers in Western Europe adhere to ESG principles and goals, while their counterparts in parts of East Asia exploit child labour and discharge industrial waste directly into the Pacific Ocean.
For the sake of global stability, Trump is effectively calling for economic pressure on autocracies using the full might of civilised nations. Until recently, such pressure was considered somewhat inappropriate. Why? Because developed nations were burdened by the memory of their colonial past and the resulting sense of guilt towards many developing countries. This also explains excessively lenient immigration policies, the reluctance to firmly prevent autocracies from joining the nuclear club, and the disregard for the erosion of global security mechanisms.
In summary, Trump’s speech outlined a plan that everyone will have to take into account, as its intentions are more than powerful and highly focused.
Photo: "Drill, baby, drill!" Oil and gas companies are brimming with enthusiasm. Source: Getty Images.
Putting an End to Inflation Without Strangling the Economy
The COVID-19 pandemic in 2020 led to an unacceptably high level of inflation. Trump has declared that this inflation was inherited from the policies of the previous administration. However, this is only partially true. In order to keep economies afloat during lockdowns, money had to be printed not only in the United States but also in many other developed nations. The resulting surge in prices was a natural consequence.
Trump plans to combat inflation not by increasing the Federal Reserve’s key interest rates but by eliminating what he calls radical left-wing policies, which he believes were responsible for the crisis. In addition to tackling inflation, he also aims to address immigration and crime.
Trump’s plan bears a striking resemblance to what was known 40 years ago as "Reaganomics"—which included business stimulation, economic self-interest, and a battle against the "Axis of Evil."
He intends to begin reducing government spending as a way to fight inflation. In the initial months, this could cause significant economic difficulties, as such spending includes procurement of American goods and salaries for public sector employees, who largely spend their earnings on American products and services. In other words, these cuts in public expenditure must be offset by other means.
Trump has proposed such an offset by limiting the so-called ‘Green New Deal’—specifically, the regulations and expenditures associated with compliance with the Paris Climate Agreement. As per his directive, the United States is set to withdraw from the agreement.
Trump has also activated a crucial lever: lowering energy costs. He has declared a national energy emergency to unlock fossil fuel production and accelerate the development of new energy infrastructure. His strategy hinges on America’s vast reserves of oil and gas.
He believes that this focus on reducing energy costs and achieving energy self-sufficiency will lower the price of almost all goods and services.
Moreover, he sees this as an opportunity to drive forward the development of artificial intelligence and the crypto economy, both of which are highly energy-intensive.
A second major avenue for economic revival is deregulation, which is intended to reduce the cost of doing business.
Additionally, Trump has launched a campaign against high taxes. This is one of the most controversial yet potentially promising aspects of ‘Trumponomics’.
Tax Revolution
Trump has announced the launch of a campaign to cut taxes – the flipside of his intention to reduce government spending. To a large extent, these tax cuts are intended to compensate for the negative effects of spending reductions, which we mentioned earlier.
He plans to implement a significant reduction in taxes for workers and families, as well as major tax cuts for domestic manufacturers. “My message to every business in the world is very simple: come and make your products in America, and we will offer you some of the lowest taxes among all nations on Earth… Under the Trump administration, there will be no better place on Earth to create jobs, build factories, or grow a company than right here in the good old USA,” Trump declared. This, in turn, paves the way for the reindustrialisation of the United States – the return of manufacturing to American soil.
But how sincere is this? How realistic is it? The deindustrialisation of the United States and Western European countries occurred 10–30 years ago when labour was cheaper in developing nations. How can reindustrialisation take place? Through low taxes, modern technology, and low costs of capital .
Trump’s intentions are aimed at increasing – or rather, restoring – the competitiveness of the United States. This is an example that other developed nations are likely to follow. The world is entering an era of economic self-interest.
Trumponomics is already trying to claim credit for recently announced investment plans in the US economy by major technology giants. SoftBank plans to invest between $100 billion and $200 billion in the United States. A consortium that includes Oracle, SoftBank, and OpenAI has announced a $500 billion investment in AI infrastructure and data centres. However, these figures are not as straightforward as they seem. Just hours after Trump’s speech, the Chinese IT company DeepSeek unveiled its own AI system, which appears to be significantly more efficient and energy-economical than its competitors, including OpenAI. The stock market reacted sharply – Nvidia, the global leader in supplying specialised processors for AI data centres, saw its market capitalisation drop by hundreds of billions.
Does this challenge from a global competitor – China – deal a fatal blow to Trump’s ambitions? Of course not. Nvidia’s stock fell to levels seen just three months ago. Cooler-headed experts do not consider this a catastrophe. If anything, such an event, occurring just as the Trump administration is shaping its stimulus policies, could provide further impetus to enhance their effectiveness.
Tough races lie ahead: technological, financial, and geopolitical. Everything is only just beginning.
Photo: Federal Reserve Chair Jerome Powell is in no hurry to cut rates in response to Trump’s calls. It may still be a little too soon, in reality. Source: Getty Images
The Great Race
Trump is recruiting a diverse array of partners for this race. He is inviting Saudi Arabia not only to invest $1 trillion in America but also to use its influence within OPEC to lower global oil prices.
The American leader firmly believes that cheaper oil would bring greater stability to the world. "If the price were to drop, the Russia-Ukraine war would end immediately. Right now, the price is high enough for this war to continue," Trump asserts.
Next, he sees it as necessary to push for lower interest rates. On the one hand, this would stimulate economic growth—cheaper money means investments flow more easily. On the other hand, economic textbooks warn that excessively low rates increase the risk of inflation. Trump, however, has an answer: lower taxes and energy prices should more than offset the inflationary impact of interest rate cuts.
In essence, he proposes a global redistribution of wealth—shifting it away from countries that profit from raw material exports towards nations that focus on manufacturing, services, and technological advancements.
But will the US Federal Reserve agree to Trump’s call for lower interest rates? Just days after his speech, Federal Reserve officials decided to keep key rates at their current level, citing the need to maintain pressure on inflation and further slow it down. However, in his public announcement of this decision, Federal Reserve Chair Jerome Powell noted that future rate adjustments would depend on the success of inflation control efforts. In other words, if inflation slows, the Fed is likely to lower rates.
Yet, other aspects of ‘Trumponomics’ face resistance. There is already pushback against his proposed cuts to government spending. Moreover, Trump himself is expected to propose substantial defence expenditures for the coming year. Notably, Ronald Reagan implemented his ‘Reaganomics’ policies during a period of intense confrontation with the Soviet Union, albeit during the Cold War. In contrast, Russia is currently waging a hot war in Europe.
The world is entering a period of global ‘Trumponomics’, as developed nations will likely follow the US’s example, albeit with some delay. The race to restore competitiveness has begun. The European Commission’s new and returning leaders had already signalled this direction in the autumn—though they likely did not anticipate how quickly events would accelerate.