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Potential Impact of a Trump Second Term on Commodity Markets
Commodity markets are bracing for increased fragmentation and supply disruptions if former U.S. President Donald Trump wins the upcoming election on November 5. These concerns were highlighted by HSBC economist Paul Bloxham on Friday. The recent U.S. presidential debate revealed a weak performance from President Joe Biden, intensifying discussions about a potential Trump comeback and the reverberations of his trade policies and proposed tariffs on China.
Risks of Trade Protectionism
Paul Bloxham, HSBC's chief economist for Australia, New Zealand, and global commodities, addressed the Reuters Global Markets Forum (GMF), emphasizing the macroeconomic risks posed by a rise in global trade protectionism. He noted that the increasing geopolitical tensions and structural supply constraints are already pushing commodity prices higher. Further trends towards protectionism could lead to a greater fragmentation of global commodity markets and create supply disruptions, which would, in turn, support elevated commodity prices.
Global Commodity Market "Super-Squeeze"
According to Bloxham, a combination of geopolitics, climate change, and the ongoing energy transition is driving what he describes as a global commodity market "super-squeeze." HSBC’s statistical model had already indicated a transition to a 'super bull' phase in commodities back in May, shifting from a 'weak bull' phase despite the prevailing high prices. The analysis suggests that commodity prices are set to remain permanently higher and are unlikely to return to their previous trends.
Beneficiaries of Elevated Commodity Prices
Bloxham pointed out that large producers, particularly those involved with energy transition materials such as copper, are expected to benefit from these conditions. Additionally, economies in Latin America, the U.S., Australia, and Indonesia stand to gain as well. These nations are well-positioned to capitalize on the persistent high commodity prices driven by global macroeconomic changes.
The implications of the U.S. presidential election on global trade and commodity markets are significant, with many stakeholders closely monitoring the potential return to Trump-era trade policies. The continuing evolution of geopolitical landscapes, combined with internal economic shifts, will critically shape the future trajectory of commodity markets worldwide.
