Blog: Trump hitting the ground running

As we stand back and assess the situation a few weeks into Donald Trump being inaugurated as the 47^th President of the United States (US), it’s clear that we aren’t short of developments to analyse.

As expected, Trump hit the ground running – issuing a flurry of executive orders (almost 50 at the time of writing), across a wide range of areas. In this piece we seek to unpick some of the key actions from Trump’s initial few weeks in office, broken down across a number of themes.

Given the fluidity of the situation and the global stage in which it is playing out, it goes without saying that our next update, covering Trump’s first 30 days in office, is almost certain to involve a whole raft of other developments building on the below.

But at this stage we will focus on some of the key developments to date, rather than speculation of the future, and we’ll kick things off with a brief recap on the function of an executive order, which has emerged as the primary tool in Trump’s toolkit as he has started to deliver his agenda for office.

Executive Orders

Executive orders are directives from the President of the US in order to manage operations of the federal government. They are not legislation (they require no approval from Congress), and Congress is not able to simply overturn them (however they can pass legislation that might make it difficult, or even impossible, to carry out).

As only a sitting US President may overturn an existing executive order, they provide a strong but potentially shorter-term method by which a President can immediately express directions for the government, ahead of more formal legislation being progressed through Congress.

Tariffs and global trade

Having indicated as such on the campaign trail, Trump put any uncertainty to rest regarding a radical new stance in relation to global trade, signing three executive orders imposing tariffs of 25% on all goods from Mexico and Canada, and 10% tariffs on energy. He also imposed an additional 10% tariff on goods from China.

Trump stated that the levy on Canadian and Mexican goods was in response to his concerns regarding the smuggling of illegal drugs, such as fentanyl, and immigration into the US, two core areas of focus from his campaign trail (although its important to note that smuggling from Canada contributes less than 1% of the fentanyl street supply in the US, according to data from the US Drug Enforcement Administration).

These actions sent a shockwave across capitals around the world, as politicians rapidly came to terms with the prospect of a new global trade war, with the potential for tit-for-tat tariffs emerging, and an extension of tariffs to a wide range of countries and regions.

Canada delivered a swift counteraction to the tariffs, with Canadian Prime Minister Justin Trudeau announcing a reciprocal 25% tariff on a range of US goods, and Mexican President Claudia Sheinbaum also announcing tariffs, but initially without detail on how these would be structured.

The broad expectation from such a tariff war would be slower growth and higher inflation in the countries at play, with the junior partner in the trading relationship likely to be affected to a greater extent. However at this stage, given the complex dynamics of global trade and the unclear nature of how this situation will evolve (including counter-tariffs), predicting the downstream effects of this remains challenging. Economic uncertainties such as demand and supply elasticities, and price pass-through speeds, further complicate matters. Some leading financial commentators such as Allianz Chief Economic Adviser Mohamed El-Erian have emphasised these difficulties, with El-Erian noting the benefits of adopting a “wait-and-see” approach, before jumping to immediate conclusions regarding variables such as inflation.

This is a highly dynamic situation that is likely to evolve on a near daily basis as the weeks progress (indeed, as this blog went to press, a suspension of 1 month was announced for the Mexican tariffs, following Mexico promising 10,000 extra soldiers for border policing), with Trump indicating that the EU was also likely to experience similar levies, but the UK may perhaps be spared the same fate. While the long-term impacts are impossible to accurately predict at this point in time, there is no doubt that we have entered a new chapter of global trade, one geared more towards protectionism rather than open markets (only heightened by Trump’s aggressive stance towards geopolitically significant areas such as Greenland and the Panama canal), with the inherent zero-sum nature of this approach likely to create clear winners and losers as the economic impacts bite.

The ‘3-3-3’ Economic Growth Plan

Having recently been confirmed by the Senate, Trump’s Treasury Secretary Scott Bessent’s broad economic objectives for the US can now be brought into closer focus. A veteran hedge fund manager (who once headed George Soros’ family office), Bessent is no stranger to the challenges faced by highly indebted nations, most notably Japan, and the ‘three arrows’ policies delivered by late Japanese Prime Minister Shinzo Abe, which sought to navigate the Japanese economy through turbulent times.

Bessent has designed his own three arrows for the US, the ‘3-3-3’ plan, which can broadly be stated as follows:

1. Raise US real GDP growth to 3% a year (up from c.2% currently, for example through tax cuts, deregulation, lower energy costs, and the reshoring of US manufacturing jobs)

2. Cut the annual budget deficit to 3% of GDP by the end of Trump’s four-year term (down from over 6% currently)

3. Increase US energy production by 3 million barrels per day equivalent (noting the use of the word “equivalent” word here – with other non-oil energy sources being a potential source of energy production increase for this goal)

The objective of this plan is to deliver non-inflationary growth, while also curbing the US’ fiscal deficit. While many have been quick to criticise Trump and his economic plans, suggesting he simply isn’t fit to hold the most important office of the world, other financials commentators have noted the wisdom of Trump appointing Bessent to the role of Treasury Secretary, with Bessent’s strategy (as outlined above) having the potential to be notably positive for the wider economy and risk assets, if implemented well.

Deregulation and the Department of Government Efficiency

As promised, Trump has set up the US Department of Government Efficiency (DOGE) – a temporary organisation within what was formerly known as the United States Digital Service. Led by tech billionaire Elon Musk, a core supporter of Trump on the campaign trail, DOGE has the goal of reducing wasteful spending and eliminating unnecessary regulations.

Trump’s executive orders in this area include reclassifying thousands of federal employees as political hires, making them much easier to be fired. Alongside this the Trump administration has offered nearly all federal workers the opportunity to resign from their posts, retaining full pay and benefits up to 30^th September. Separately Trump signed a further executive order requiring all federal workers to return to their offices five days per week (with some notable exemptions).

The broad intention with all these plans is the “downsizing” of federal spending and the size of the government, alongside reducing the size of the federal deficit. While there is little doubt that the US has a deficit and debt issue (with, for example, total US federal debt currently standing at over $36trn), the aggressive nature of these actions, as well as the role of Musk, who has not been appointed to any office, raise clear questions and concerns.

Climate change and sustainable investing

On the campaign trail Trump was clear in relation to his confrontational stance to the environmentalist cause, with his “drill baby drill” catchphrase a core part of his repertoire, used as a way of energising his voter base, in part located within fossil fuel-dependent states in the South of the US. As he entered office Trump carried out a number of initial actions in support of this agenda, including pulling out of the Paris Agreement (for the second time), as well as seeking to unpick Joe Biden’s Green New Deal, including announcing a moratorium on offshore wind farm projects.

While there are clear headwinds in the US resulting from Trump’s agenda, we do not believe this impacts the ESG and sustainable investment agenda to the extent to which some media articles make the case for. While the US is the dominant power in the world, this power is gradually fading, with both the rise of the BRICs nations, and the European countries still holding relevance in a global landscape. Notably, we believe the US’s hand is perhaps weaker than its leaders currently believe, with China having replaced it as a primary trading partner for many countries around the world. These threats (such as tariffs, outlined as above) may have the effect of pushing countries further into the trading arms of China, and away from the US, only weakening the US’s status further.

In light of this, we do not expect a widespread shift away from sustainable investment globally. Supporting this are the clear scientific realities regarding environmental degradation and climate breakdown, that are becoming more apparent by the year. To follow an “anti-green” approach is to believe that countries across the world will not seek to address our failing environmental support systems, but instead will seek to switch back towards the fossil fuel agenda, accelerating the breakdown processes that are already in place. We simply do not believe this is feasible at a global scale (even if feasible in the short term, within the US), but instead believe that governments and regulators around the world will continue to move in the direction of travel given the underlying scientific realities at play – moving towards a lower carbon, more sustainable future.

Artificial Intelligence

Another area Trump has been active in during his first days in office, is Artificial Intelligence (AI). The growing trend of AI has been clear, both the technological development, particularly around Large Language Models (LLMs) such as Open AI’s ChatGPT and the advanced chips (for example from NVIDIA) supporting them, as well as the financial markets impact, as AI-related stocks in the US drove stock market returns once again over 2024.

Building on this, one of Trump’s early announcements included ‘Stargate’ – a new joint venture investing up to $500bn into AI-related infrastructure, by a new partnership formed by tech companies OpenAI, Oracle, and SoftBank. This announcement demonstrated Trump’s commitment to this area, and his belief that the rapidly growing industry will be one of the core engines of the US economy in the coming years.

However, subsequent developments in China took the shine off this announcement, with the release of the ‘DeepSeek’ AI model, which was seemingly competitive with other LLM’s such as ChatGPT, but allegedly created at a significantly lower cost, and importantly with the code made open-source (rather than held in a proprietary manner, such as with ChatGPT / OpenAI). This initially led to significant falls in AI-adjacent stocks such as many of the Magnificent Seven (for example, NVIDIA lost around $600bn in market capitalisation in a single day), before the sector recovered somewhat. As the dust settled, there remains some uncertainty regarding the extent to which DeepSeek is another leap forward in AI technology, as well as the true budget for developing the model. As the weeks and months progress we will begin to see the extent to which this it is a core competitor to US equivalents, and the subsequent impact on AI share prices.

Bitcoin and cryptocurrency

Having previously noted in our election blog about Trump’s promises to create a “strategic bitcoin reserve”, and a positive stance towards the bitcoin and cryptocurrency industry more broadly, Trump lived up to these expectations in his early days in office – ordering the creation of a cryptocurrency working group tasked with exploring the creation of a national digital asset stockpile and proposing new digital asset regulations.

With this working group including key Trump administration figures such as Scott Bessent, the Treasury Secretary, Howard Lutnick, the Secretary of Commerce, and Pam Bondi, the Attorney General, it is clear that the Trump administration is serious about this initiative, with cryptocurrency, similarly to AI, being another area Trump has identified as a potential growth engine for the US economy during his time in office.

With the working group set to report back within 180 days, we will see its initial recommendations (for example putting meat onto the bone of the digital asset stockpile proposition), and the extent to which this administration is serious about providing nation state leadership in this area.

Conclusion

Trump has truly hit the ground running – beginning to deploy his agenda with a pace and ferociousness that has been a sight to behold, but disorientating for some.

Given the pace of change, and some of the new structures that are emerging (most notably the expansion of Tariff’s as a primary weapon of trade), it is fair to say that the election of Trump for a second term has been a true fork in the road for the US, and as a result the global economy.

Trump’s agenda is undoubtedly divisive, with his supporters elated as he enacts a range of policies as promised on the campaign trail, while his detractors look on aghast, with the global ‘rules-based order’ seemingly collapsing in front of their eyes. Once again, we think the reality is somewhere in the middle – while we disagree with Trump on a range of issues (most notably around the environment and climate change), we can also appreciate the objectives of the Trump administration and the goals they are seeking to achieve over the coming 4 years.

We’ll continue to keep you updated on developments as they progress, with our next major update coming after Trump’s first 30 days in office, and how things stand at that point in time.

If you have any questions or require any specific information in the meantime, then please don’t hesitate to get in contact with your usual ebi representative.

For financial professionals only.

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Blog Post by Jonathan Griffiths, CFA
Investment Product Manager at ebi Portfolios

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