Trump reloaded - what we have to reckon with

The U.S. elections in November will undoubtedly be the dominant theme of 2024.

Scenarios after the 2024 US elections

Given the quickly approaching U.S. elections, LBBW Research has added a negative scenario "Trump unleashed" to its scenarios. Given all this, we currently believe that the most likely scenario is a relatively moderate Trump term or a second Joe Biden presidency. In this main scenario, which we assess as having a 60 % probability of occurrence, the U.S. government pursues a protectionist trade policy with a moderate increase in import tariffs, while government debt rises moderately. Global economic development would be subdued, with above-average growth in the U.S. - fueled by stimulus. measures - while Germany's economy would continue to struggle. The world's leading central banks would lower their key interest rates, more hesitantly in the United States than in Europe.

In this negative scenario (“Trump unleashed”), we took a closer look at the consequences if Trump were to take more drastic actions. There are threats and proposals from the agenda "Project 2025" of the Heritage Foundation, a conservative think tank. We rate the combined probability of Trump being elected and then acting "unleashed" at 25 %. Tariffs on U.S. imports will rise to 10 % - for imports from China even up to 60 %. Trump's unclear stance in a NATO Article 5-event and a possible escalation in relations with China would contribute to an increase in political tensions around the world, for example in the Middle East, between China and Taiwan, and between the U.S. and Iran. Europe must also prepare for turbulent times. Given the higher change of a recession, the ECB would rapidly lower key interest rates. In conjunction with rampant economic fears, German government bond prices would soar.