ING chief economist: ‘The stock market will be the compass of the next Donald Trump administration’

Marieke Blom, 50, is cautious in her projections. The chief economist of the Dutch bank ING warns that the world is about to face a new storm with the return of Donald Trump to the White House. However, the economic impact, at least for Europe, will not be as severe as Covid-19 or the energy crisis triggered by the Russian invasion of Ukraine. Nevertheless, she points out that the tycoon and his protectionist policies represent a real risk to European stability.

Question. What is the state of the global economy?

Answer. It varies widely. China is under enormous pressure, with slow growth and under a lot of pressure from the real estate crisis. The United States continues to surprise on the upside with growth driven by citizens who are spending, spending, spending. In Europe, what we see is a very prolonged period of stagnation. Consumers are saving a large part of their income. The economy is going sideways rather than in a gradual increase.

Q. What do you expect from Trump’s upcoming presidency?

A. We don’t know for sure because he’s saying so many things. He has said that he will raise import tariffs — everyone is talking about 10% to 20% across the board and up to 60% on some products from China — he has promised numerous tax cuts, deregulation in the economy — especially in sectors such as energy and banking, he may be a bit less strong on antitrust and competition policy — and he may consider the Fed to be not as independent as it is right now. Despite all this, we find it likely that his compass will be the stock market.

Q. What do you mean by that?

A. For example, with tariffs: of all the goods the U.S. imports, about 50% are related to domestic value chains. Raising them will penalize foreign exporters, but could end up hurting U.S. companies, as happened with Apple at the time. These companies are likely to oppose such tariff increases. On issues of taxes, government deficits and central bank independence, there is a risk of a sell-off in U.S. stocks. This could devalue the dollar, increase interest rates and ultimately hurt the stock market.

Q. What happens if that happens?

A. His circle might warn him about the risks of continuing with such risky policies. Another important factor is Ukraine. Trump has said he will reach an agreement, and we believe he has the leverage for it. But it is unlikely to be a very favorable deal for Ukraine.

Q. Europe is not going through a good moment. Political and economic crises are weakening Germany and France, while populism is growing. Is Trump a threat to the European economy?

A. The measures that Trump is considering represent a risk for the European economy. First, there is the export aspect: sales to the United States are at risk. Second, the defense issue. Less U.S. aid to Ukraine or to Europe in general would increase the pressure on European economies, as governments would have to find ways to compensate, which would further strain public finances. Trade is Europe’s strength. Its essence lies in the interconnection of its small countries, promoting exchange to maintain peace and stability. Trump’s preference for bilateral rather than multilateral agreements disrupts this system, generating both economic and political stress. Sustainability is another concern. The Green Deal, a pillar of the European agenda, is under pressure. But the impact of Trump’s measures on Europe will be gradual, not a short-term shock. And although it will be damaging, it will not be comparable to the crisis that resulted from Covid-19 or the energy crisis following the Russian invasion of Ukraine.

Q. What are the biggest challenges facing the EU in terms of economic integration?

A. The challenges are numerous. One of the main problems is the lack of a big market for services. The Draghi Report highlights that Europe has too little focus on technology and remains dominated by industries such as pharmaceuticals, chemicals and automotive, sectors stuck in the past. It is essential to make the transition to industries of the future. To achieve this, markets must be further integrated to make it easier to compete across borders. Policymakers must consider whether all current regulations are necessary or whether some could be simplified to foster growth, while distributing the benefits of innovation fairly among citizens.

Defense is another major concern. Europe is struggling to adequately defend itself and Ukraine. Energy costs are also an issue, though not the most significant one. However, European companies are at a disadvantage against global competitors due to high energy prices. Systems such as the Carbon Border Adjustment Mechanism (CBAM) can help protect against foreign competition, but European companies also face challenges competing internationally under these energy cost pressures.

Q. What is your forecast for European GDP in 2024 and 2025?

A. We have downgraded the growth outlook for next year. Growth remains sluggish, at 0.7% for both years. Factors such as fiscal consolidation, tight monetary conditions and cautious consumption contribute to this scenario. Consumers hold the key. Savings rates in Europe are historically high, so if confidence recovers and people start spending, growth could accelerate. Although we expect the rebound to be slow, uncertainty clouds the outlook.

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