Overview
What We’re Watching Today is 1,212 words and an 8-minute read.
Global
Donald Trump wins US elections on economic message; new trade policies likely to have significant global impact
Donald Trump's election victory will have economic consequences for the rest of the world that are likely to be deep and quite immediate.
Our Take: If incoming President Trump implements trade policies he advocated during the campaign, the global economy will see a host of protectionist trade policies, including broad tariffs, deregulation in the domestic economy increasing US competitiveness and a significant shift in climate policies, favoring oil and gas exploration, development and export. Markets will not wait for the inauguration in January to adjust, with the US dollar expected to strengthen, making borrowing more expensive for emerging markets. Export dependent economies, such as China, will have strong incentives to seek new markets for goods. More broadly, countries will be preparing retaliatory tariffs, to create leverage for negotiations with the incoming Trump administration.
Read More: Reuters [paywall], Deutsche Welle, Euronews, Nikkei Asia [paywall]
Europe
Germany’s ruling coalition collapses over stark choices on budget
Germany’s coalition government collapsed on Wednesday and Chancellor Olaf Scholz is under pressure to call for early snap elections, with no agreed budget in place.
Our Take: Scholz’s coalition government lasted longer than most expected, comprised of ideological odd bedfellows, the Social Democrats, the Greens and Free Democrats. Consensus over economic policy was a bridge too far, with each coalition party presenting their own preferred budget on how to plug a €10 billion gap. Germany is constitutionally obliged to balance its budget and are practically prohibited from taking out extra loans, the so-called debt-break. Scholz dismissed finance minister Christian Lindner of the Free Democrats who refused to make use of an exception to the debt brake, as was previously done in 2020 and 2021 related to the pandemic and the war in Ukraine. Now, Scholz heads a minority government and will need the support of opposition leader Friedrich Merz (the conservative Christian Democratic Union), to govern until new elections. Scholz needs backing for a budget, and the cost of Merz’s support is early elections.
Read More: Deutsche Welle, Financial Times [paywall], German Marshall Fund
Middle East
Netanyahu appoints loyalist to defense portfolio
Israeli Prime Minister Netanyahu appointed longtime ally Israel Katz as his new defense minister, filling the spot vacated by Yoav Gallant, who had pushed for a ceasefire and whose dismissal prompted anti-Netanyahu protests.
Our Take: Katz’ primary qualification for the job is seen by analysts as the fact that he is a staunch Netanyahu proponent – the former foreign minister, Katz has little military experience, and is expected to act primarily as a yes-man to rubber-stamp Netanyahu’s efforts in Gaza and Lebanon. Alongside the reelection of President Trump, two of the largest brakes on the Netanyahu government – Gallant and the Biden Administration, both of which have pushed a negotiated end to the conflict – are gone. Netanyahu is now relatively free to pursue a “total victory” over Hamas, a strategy that observers worry could spark further regional conflict and reduce chances to retrieve Israeli hostages still in Hamas.
Read More: Washington Post [paywall], Wall Street Journal [paywall], The Economist [paywall]
Americas
Migrant caravan halves following election news
A caravan of thousands of migrants that had set out for the American border from the Mexican town of Tapachula lost about half its size following the news of President Trump’s reelection.
Our Take: The caravan, one of several that had been attempting to reach the border ahead of the American elections, shrunk from over 3,000 to around 1,500 after the US election was called. Trump has long advocated much stricter immigration laws, especially for those from Latin America, and the news of victory reportedly scrambled the caravan, leading several to attempt to return to Tapachula or otherwise stay put in Mexico. The caravan had largely consisted of Venezuelan migrants.
Read More: Reuters [paywall], Voice of America
Asia-Pacific
Thai Prime Minister meets with Myanmar junta leader
Thai Prime Minister Paetongtarn Shinawatra on Thursday met Myanmar’s junta chief on the sidelines of a regional summit in China.
Our Take: Thailand’s engagement with Myanmar’s junta points to its pragmatic approach to maintaining influence and stability along its border with Myanmar. Despite international condemnation of Myanmar’s military crackdown following the 2021 coup, Thailand’s economic ties, including extensive cross-border trade and energy reliance, compel it to continue diplomatic engagement with Myanmar’s junta government.
Read More: Bangkok Post, CNN, Fulcrum
Africa
Mozambique police crack down on protests against disputed election
Police in Mozambique fired tear gas at protestors in the biggest demonstration yet against the country’s ruling Frelimo party, following its victory in a disputed election.
Our Take: The ongoing unrest following Mozambique’s disputed election demonstrates deep-seated frustrations with the incumbent Frelimo party and public demands for political reform. The heavy-handed crackdown by the Mozambican police, coupled with threats to deploy the military, risks further destabilizing the country and leading to a large-scale conflict, while also damaging regional and international relations, as evidenced by South Africa’s decision to close its border with Mozambique. Presenting economic and humanitarian risks, the volatile environment threatens to affect major infrastructure and foreign investments in Mozambique with prolonged unrest and instability.
Read More: Reuters [paywall], Al Jazeera, Associated Press
Trade & Compliance
Nippon Steel aims to close US Steel deal before administration change
Nippon Steel plans to finalize its acquisition of U.S. Steel by next month despite political uncertainties after the U.S. presidential election, according to a top executive.
Our Take: While Nippon Steel remains optimistic on its planned acquisition of US Steel, the prospects are uncertain, given rising protectionist sentiment and economic populism in the United States. Analysts have noted potential benefits of the takeover for US firms and workers, with Nippon Steel’s $2.7 billion investment in facility upgrades being able to modernize US Steel, enhancing competitiveness and potentially preserving American jobs that are currently at risk. However, US politicians and unions are concerned about foreign ownership in a critical industry, pointing to national security concerns and questions of economic independence.
Read More: Reuters [paywall], Nikkei Asia [paywall], The Hill
Climate Change
EU Deforestation Law delay
More than 50 companies are urging the EU not to delay its landmark deforestation law, as it is causing uncertainty across business operations and putting investment at risk.
Our Take: The EU decided to postpone the implementation of the law by one year because of fierce opposition from countries producing cocoa, palm oil, rubber and wood that would be subject to the EU import ban on goods which are made with commodities grown on deforested land. Companies opposing the delay argue that potential of regulatory changes at this stage add new investment risks given that they had already made changes to switch to more sustainable practices. The law would require producers to trace products back to their geographical source and is anticipated to reconfigure trade and supply chains. Conservation groups have championed the deforestation regulation as it would create more transparency into the agricultural supply chain and create economic and investment incentives to halt habitat conversion caused by commodity production. Deforestation is the second largest source of the greenhouse gas emissions that cause climate change after the burning of fossil fuels, according to the European Commission.
Read More: Financial Times [paywall], Reuters [paywall], S&P Global
