No moderation
After a few days of overindulgence during the year-end celebrations, January is usually a month for sobriety, New Year’s resolutions and the Dry January challenge. But it’s quite a different story this year on the other side of the Atlantic.
Just a few days from the inauguration of Donald Trump on the steps of the Capitol in Washington on 20 January, the path of the Trump 2.0 administration is already littered with examples of excessive behaviour.
On the diplomatic front, Donald Trump’s outbursts on Mexico, Canada and Greenland, and Elon Musk’s repeated interference in German and UK politics suggest that the traditional allies and partners of the US will be in for a more troubled relationship in the coming four years. Still more worrying is the fact that territorial sovereignty and self-determination are no longer sacrosanct for the US – a turnaround that could ultimately inspire broader regional ambitions in other major powers. China’s approach to Taiwan is the first thing that springs to mind here.
From a democratic perspective, the easing of the moderation of social media networks Facebook and Instagram ushers in the post-truth era. The floodgates are now fully open in the US for disinformation, fake news, deepfakes and conspiracy theories, which will continue to destabilise democratic safeguards.
On the economic front, Elon Musk is threatening sweeping cuts in the US administration. With the aim of making it more efficient by slashing public spending, his ambition is to reduce the federal budget by USD 1,000-2,000 billion – between 15% and 30% of the current budget. Achieving this without laying off a large number of civil servants and drastically cutting public contracts seems improbable. The medium-term consequences could be beneficial for the deficit and the debt trajectory, but such a shock to employment and public demand risks undermining US growth in the shorter term. For his part, Donald Trump continues to remain evasive on the breadth and sweep of the customs tariffs that will be rapidly implemented after his inauguration.
These excesses and uncertainties all make the next four years difficult to read on many levels, and this includes stock market trends. But the first Trump mandate offers an initial insight – it’s better to stick to actual decisions and avoid taking off-the-cuff statements by the future US administration at face value.