The world’s economic elites have gathered in Washington. Officially, they’re there to talk numbers—debt, inflation, interest rates. But the real topic of interest is Donald Trump.
The ex-president’s possible return to the White House has taken over discussions at this year’s annual meetings of the International Monetary Fund (IMF) and World Bank. From public panels to steakhouse dinners, conversations have shifted to the upcoming U.S. election.
And why not? The vote is less than two weeks away, and everyone’s watching. The two presidential candidates offer dramatically different views on the biggest economy on earth.
In private, officials even link Trump’s potential return to other top risks to global stability, like wars in Ukraine and the Middle East.
Rising concerns and strategic calculations
Gita Gopinath, the IMF’s first deputy managing director, recently explained why the organization lowered its global growth forecast. She singled out the U.S. as one of the strongest economies worldwide, making its presidential race a big deal.
Right now, Vice President Kamala Harris stands for the current path (which isn’t working well, keep in mind), while Trump vows to upend global trade, even more than he did last time. He’s already thrown out ideas: a 60% tariff on China, plus a potential 20% tariff on other trading partners.
This is “high uncertainty,” according to one top IMF official. The stakes? High enough that, as things stand, the global economy is heading for a soft landing. But throw in a Trump comeback, and investors are getting twitchy.
And on the sidelines are plenty of events for those eyeing the election outcome. The financial diplomats didn’t say Trump’s name out loud. Some, though, reassured investors of the U.S. economy’s resilience, saying that his first term has already offered lessons in negotiating with him.
Global trade and the Trump factor
Pakistan’s Finance Minister, Muhammad Aurangzeb, seemed calm in the face of uncertainty. He said that, regardless of who wins, the U.S. will remain a major trade partner for Pakistan. His country is ready, he said, for any policy that comes next. “So all hands on deck from our side to ensure that it remains so.”
But challenges are mounting for America. The BRICS countries, led by heavy hitters like Russia and China, want to rewrite the rules. Just this week, Russian President Vladimir Putin cheered the “shift toward a multipolar world” at the BRICS summit.
Trump’s view on Western-led institutions has always been skeptical, and that hasn’t changed. Still, World Bank President Ajay Banga, who was nominated by President Joe Biden, holds out hope.
Banga suggests that, if Trump wins, he could come around to the World Bank’s value, given its leverage in pooling resources for big goals. “Let’s wait to see what comes out of the elections,” he said. “Let’s engage with the presidency with the respect it deserves.”
Over at the European Central Bank, Christine Lagarde kept a wary eye on trade. She warned that if the U.S. president—whoever that may be—decides to turn inward and slap up trade barriers, it could cost everyone.
“Periods of restrictions and barriers have not been periods of prosperity and strong leadership around the world,” Lagarde said at a Washington event. Any incoming U.S. leader, she insisted, “should at least bear that in mind.”
Shifting policy focus and the risks
Wednesday night saw Gavekal Research, a firm focused on China, run a discussion at a D.C. steakhouse. Topic? Trump, trade policy, and the probable revival of tariffs. Speakers seemed sure Trump’s ready for a rematch with China, and that he hasn’t forgotten COVID or Xi Jinping’s perceived role in the 2020 election loss.
On the brighter side, the global battle against inflation shows signs of progress. Inflation, which hit 9.4% in the third quarter of 2022, could drop to 3.5% by next year. In most countries, inflation is now aligning with central bank targets, setting the stage for looser monetary policy.
The global economy has been resilient, even as inflation dropped. Global growth should hold at 3.2% through 2024 and 2025, though conflicts, particularly in low-income areas, weigh on growth.
Growth in the U.S. reached a solid 2.8% this year, but expectations have it falling toward the nation’s potential in 2025. Emerging markets, especially in Asia, continue to outperform, with stable growth at around 4.2%.
The inflation drop without a full recession is a success, mainly because supply chain shocks eased after the pandemic. As labor markets calmed, inflation fell without a slowdown.
Now central banks are changing direction. Since June, they’ve been cutting rates and moving to neutral policy. With labor markets softening, lower rates could relieve major economies. This is good news for emerging markets, where currencies strengthen against the dollar.
Governments also pivot on fiscal policy. Loose spending policies are ending as nations strive to control debt. Even with rate cuts, governments must tighten budgets. Real interest rates remain high, so many countries need to boost revenues.
The U.S. and China, in particular, lack plans to stabilize their debts, which should be terrifying since they are the largest economies we got.
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