.jpg&h=684&w=1216&q=100&v=5f99a4b43f&c=1)
Markets in Asia Pacific (Apac) breathed a sigh of relief on Tuesday, January 21, as newly inaugurated US president Donald Trump appears to be looking for deals when it comes to tariffs.
The Australian Securities Exchange (ASX) finished at its highest level in six weeks despite a sharp dip in trading at one stage. On January 21, the S&P/ASX 200 Index closed up 0.6% to 8397.8, while Hong Kong's Hang Seng Index finished up 0.91% at 20,106.
Without making specific announcements on tariffs, Trump made quick moves following the inauguration, signing executive presidential orders to remove the US from the World Health Organisation (WHO) and also the Paris Climate Accord. Trump made the same WHO order in his first presidency in July 2020, but as it takes the US a year to leave the WHO, president Biden then changed the order when assuming office in January 2021. The move could prove costly; the US is the WHO's largest donor, while the WHO provides critical information and research to the US.
Trump even signed an order to rename the Gulf of Mexico to the Gulf of America, although the exact impact of this move to the rest of the world is unclear. The full list of presidential actions are here.
Trump also declared a national emergency at the border, over immigration, and another concerning energy, citing energy security. Trump wants to stop illegal immigration, which could impact genuine asylum seekers, and also deport hundreds of thousands of criminals who are in the country illegally. He also wants to help drive down energy prices to drill for more oil on US soil, while also increasing oil exports, another potential tariff bargaining chip.
On a positive note for Apac, so far Trump has not decided to implement tariffs, although he cited a possible date of February 1 for 25% tariffs on Mexico and Canada -- acts that would cause huge economic damage to the US and the global economy. He has also added his adminsitration is considering 10% tariffs on China on the same date, with Trump likely looking for deals, before making a final decision, although nothing is certain.
Popular digital app TikTok has been cited as a potential key bargaining chip for tariffs between China and the US. ByteDance’s TikTok has been given a reprieve of 75 days after the app had been banned in the US under outgoing Joe Biden's administration, which had cited national security concerns. A part ownership deal for the app could be on the agenda for Trump's team, although 60% of ByteDance is controlled by overseas investors such as SoftBank and General Atlantic; these investors will now be hoping to secure an agreement to keep the app online in the US.
Christopher Hodge, head economist for the US, at Natixis Corporate and Investment Banking (CIB), said in a media webinar on January 21 that the tariff threat “will always be there” and that deals might be done over drugs, borders, controls, immigration etc. with the likes of Mexico and Canada.
Hodge added that incoming treasury secretary Scott Bessent, assuming he is confirmed by the Senate, has a lot of experience and will caution Trump on the impact of tariffs on the US stock exchanges after they were impacted under Trump’s first term.
Economists at Natixis are expecting three US interest rate cuts this year as opposed to most economists' consensus view of two.
A survey unveiled by Economist Impact and DP World at the World Economic Forum in Davos, showed that 40% of global firms are increasing their US-based sourcing and a further 32% are adopting dual supply chains to mitigate against political risks.
New government
With the end of Joe Biden's four year presidency, there will be many changes inside the government and at key regulators such as the head of Securities and Exchange Commission (SEC).
On the day of Trump’s inauguration, SEC’s chairman crypto critic Gary Gensler officially resigned, with Paul Atkins, co-chair of the Token Alliance, a cryptocurrency advocacy group for the Chamber of Digital Commerce, his likely replacement, subject to a Senate confirmation. Atkins was a commissioner of the SEC under George Bush. Republican and crypto fan Mark Uyeda, and a commissioner at the SEC since June 2022, is acting SEC chairman as the process to confirm Arkins takes place.
There will also be a host of influential economic figures in the Cabinet such as commerce secretary Howard Lutnick, head of Cantor Fitzgerald and BCG Group, who are more 'tariff friendly' than others.
Billionaire and X owner Elon Musk is expected to lead a new Department of Government Efficiency (DOGE), assuming it is made official, but there is still uncertainty over how much influence it will have on cutting expenditure in the administration. It is also unclear if Musk is in favour of tariffs given the global footprint of his businesses.
Meanwhile a joint venture between Oracle, SoftBank, OpenAI and Oracle are readying to deploy at least $100 billion for data centres and artificial intelligence projects in the US as a joint venture. According to media reports, firms such as Nividia and Microsoft could join them.
As the Trump administration unfolds, expect plenty of jaw dropping moments to come. China has been bracing for this moment and its central bank, the People's Bank of China (PBOC) has pledged more proactive monetary policy measures this year to help support its economy and the value of the Renminbi.
