IE International Relations Society Newsletter

America's Choice, the World's Consequence: Donald Trump Elected 47th President of the United States?

In one of the most divisive elections in U.S. history, former President Donald Trump has returned to the White House, eight years after his initial victory and four years after his loss to Joe Biden. Winning both the Electoral College and the popular vote by substantial margins, Trump’s historic comeback makes him the first U.S. president to secure a second term while facing ongoing legal issues. Although Trump’s 2025 policy agenda is not yet fully defined, he has indicated a focus on immigration, trade, tax cuts, and reducing Chinese influence on the U.S. economy. These priorities align with the conservative ambitions of the "Project 2025" blueprint, which, though Trump denies involvement, proposes sweeping reforms, including cuts to federal bureaucracy, increased executive power, and stricter social and environmental regulations.

On immigration, Trump’s campaign highlighted a large-scale deportation program and limiting welfare benefits for undocumented immigrants. His administration aims to invoke the Alien Enemies Act to target gang members specifically, proposing the designation of Mexican drug cartels as terrorist organizations, with seized criminal assets directed to support victims of crimes committed by undocumented immigrants.

For trade, Trump plans to impose tariffs of 20% or higher on foreign imports, focusing on Chinese goods, and aims to restrict U.S. investments in Chinese companies. While he views this as protecting American industries, economists warn that these tariffs could drive up consumer costs. Trump also proposes tax cuts across income levels and the elimination of Social Security income taxes, though funding sources for these initiatives are not fully detailed.

On foreign policy, Trump has emphasized a “focus on home” approach. He pledges to “end the Ukraine War within 24 hours” through direct negotiations with the Kremlin and advocates for a gradual disengagement of American forces from overseas conflicts, focusing instead on domestic stability.

Trump’s victory underscores a shifting political landscape as he returns to office with a bold agenda to reshape U.S. policies both at home and abroad.

Germany's Coalition Collapses as Scholz Fires Finance Minister, Snap Election Looms

Germany’s coalition government collapsed on Wednesday after Chancellor Olaf Scholz announced the dismissal of Finance Minister Christian Lindner. This move effectively removes Lindner’s Free Democratic Party (FDP) from the coalition, signaling a major rift and forcing a confidence vote scheduled for January 15. If Scholz loses, a snap election could be set for March. The coalition, made up of Scholz’s Social Democrats, the Greens, and the fiscally conservative FDP, struggled to maintain unity over spending policies. Scholz sought more budget flexibility to boost aid for Ukraine and support economic stimulus, but Lindner remained firm on strict spending limits, citing his “oath of office.” The FDP has been trailing in polls, and Lindner’s conservative stance on taxes and spending only deepened the divide. As Germany faces potential economic strain under a new U.S. administration, Friedrich Merz of the center-right Christian Democratic Union (CDU) called on Scholz to expedite the snap election timeline, arguing that Germany’s political instability demands immediate resolution.

Global Leaders React to Trump’s Re-Election, Highlighting U.S. Ties and Future Cooperation

Following Donald Trump’s re-election, prominent world leaders and international organizations highlighted the importance of their ties with the United States. The European Union emphasized the strength of its transatlantic partnership with the U.S., with European Commission President Ursula von der Leyen stating, “The EU and the US are more than just allies. We are bound by a true partnership between our people, uniting 800 million citizens.” European Council President Charles Michel added that the EU looks forward to “constructive cooperation” with the U.S. as “allies and friends.” In the United Kingdom, Prime Minister Keir Starmer congratulated Trump, emphasizing shared values of “freedom, democracy, and enterprise” and reaffirming the UK’s alliance with the U.S. China, through Foreign Ministry spokesperson Mao Ning, reaffirmed its policy of “mutual respect, peaceful coexistence, and win-win cooperation,” indicating a steady approach toward future U.S. relations. United Nations Secretary-General Antonio Guterres also congratulated Trump, emphasizing that the U.S.-UN relationship is vital for tackling global challenges.

Netanyahu Fires Defense Minister Amid Protests and Rising Tensions

Israeli Prime Minister Benjamin Netanyahu’s dismissal of Defense Minister Yoav Gallant has sparked widespread protests across Israel, with many calling for Netanyahu’s resignation. Netanyahu cited a “crisis of trust” and “significant gaps” between himself and Gallant, claiming their fractured relationship had impacted Israel’s ongoing campaign in Gaza. Gallant, known for opposing military exemptions for ultra-Orthodox Israelis, revealed his removal stemmed from three key disagreements: his support for returning hostages through “painful concessions,” his stance on military service equality, and his call for a national inquiry into Israel’s defense strategy. Netanyahu’s appointment of Foreign Minister Israel Katz, known for his more aggressive military views, has heightened public concern. Many protestors are urging the new defense minister to prioritize a hostage deal. Gallant’s dismissal comes as Netanyahu faces pressure from far-right allies to pass legislation exempting ultra-Orthodox citizens from military service, an exemption Gallant publicly opposed. The White House acknowledged Gallant as a key partner and vowed to continue collaboration with Israel’s defense leadership.

China Unveils $1.4 Trillion Stimulus Amid Trump’s Economic Pressure

China has launched a substantial $1.4 trillion bailout package to support local governments and stabilize its economy as it anticipates rising trade tensions under President Donald Trump. The plan, revealed by China’s National People’s Congress, authorizes local governments to issue bonds over the next five years to restructure about $1.9 trillion in “hidden” debts held by financing vehicles previously used to fund infrastructure and property developments. These investments went wrong following a steep decline in China’s real estate sector, causing fiscal strain at the local level. Investors, however, were disappointed as the package provided limited support for consumer spending. The Chinese Yuan dropped 0.3 percent against the dollar after China’s central bank set its lowest rate in a year in response to the dollar's rally following Trump’s re-election. Analysts warn that Trump’s proposed 60 percent tariffs on Chinese exports could further strain the economy, with Beijing possibly holding back additional stimulus to counter these potential trade barriers.

U.S. Equities Rally on Trump’s Election Victory

Donald Trump’s 2024 election victory has caused a significant movement in capital markets, driven by expectations surrounding his economic agenda. On November 8, the S&P 500 closed just shy of the historic 6,000-point mark at 5,995.54, and the Dow Jones reached a record high above 44,000, reflecting investor optimism over anticipated tax cuts, deregulation, and increased infrastructure spending.

Financial sectors, especially banks, led the post-election rally as investors bet on lower taxes and deregulation under Trump’s policies. The Financial Select Sector SPDR ETF rose nearly 6%, while the Russell 2000 index of small-cap stocks surged by 5.8%, a sign that Trump’s agenda may favor domestic-focused companies.

However, rising yields in bond markets reflected a different sentiment. The 10-year Treasury yield hit its highest level in over a year, driven by expectations of increased government borrowing for Trump’s infrastructure projects and concerns over inflation. In currency markets, the U.S. dollar strengthened on anticipated rate hikes, while the Mexican peso and Chinese yuan weakened amid trade policy uncertainties.

Trump’s policies, blending tax cuts and tariffs, has been beneficial for the U.S. equity market but has simultaneously introduced volatility in bond and currency markets, setting the stage for major shifts in the global economic landscape.