Latest US elections: Trump storms to win US election; world leaders congratulate him; US embassy in London attacked | US News

With Paul Kelsobusiness reporter

Donald Trump’s victory was secured by a firm promise to American households that he would “end inflation,” but markets and economists predict Trump will do the exact opposite in his second term.

The combination of corporate tax cuts, government borrowing, reduced immigration and variable tariffs on overseas imports is expected to fuel the American economy and trigger price increases.

Yields on 10-year U.S. Treasuries, the price at which the American government borrows money, rose more than 3% as European markets opened.

This is a signal that investors believe borrowing will increase and the Federal Reserve will have to slow interest rate cuts to combat inflation.

A clearer picture will emerge tomorrow when Fed Chairman Jay Powell, whom Mr. Trump said he would not reappoint, announces his next move on interest rates.

Markets were still expecting a 0.25 percentage point cut (a similar move to what the Bank of England had expected earlier in the day), but Mr Powell’s comments will be scrutinized for signals of what Trump’s two signals mean for the possibility of further cuts.

Higher prices for consumers aren’t necessarily bad news for corporate America; but as the dollar rose against the pound and the euro as swing states fell for Mr. Trump and Wall Street futures pointed higher when they reopen with Trump confirmed as president-elect.

Shares of U.S. banks, JPMorgan, Goldman Sachs and Morgan Stanley rose more than 6 percent in premarket trading, while shares of Tesla rose more than 13 percent as markets awaited a dividend from Elon Musk’s campaign endorsement.

Defense stocks were also high, and not just in the US; BAE Systems and Rolls Royce were also on the rise; This reflects potential pressure on America’s NATO allies to meet their commitments to increase spending.

Bitcoin was also a positive as a president who used the campaign platform to launch his own cryptocurrency was anticipating a more benign regulatory environment.

By contrast, renewables, the target of much of Joe Biden’s economic stimulus, were in negative territory; wind and solar priorities would likely be replaced by a “don’t drill, baby, drill” pledge.

Of greatest concern to America’s trading partners and allies will be Mr. Trump’s promise to impose barriers to free trade. The man who said tariffs were “the most beautiful word in the world” promised to impose a 60 percent duty on imports from China and a 10 percent duty on those from other countries; This was a highly protectionist move that could trigger a trade war with both China and the EU.

These can only increase prices in the United States, with importers paying the duties at the point of entry and other trading blocs reciprocating. The EU has already imposed its own 35% tariff on Chinese electric vehicles, to the dismay of carmakers on the continent the measure aims to protect.

While these tensions continue, post-Brexit Britain, a relatively small player outside the major trading blocs, is likely to remain a bystander.