Security to geopolitics, economy to tariffs, regulation to media: what can the world expect in Trump’s second term?
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The return of Donald J. Trump as President of the world’s most powerful nation has great embedded expectations. From inward-looking domestic economic shifts to outward disruptions through international geopolitical swings, Trump’s presidency, over the next four years, is going to be unpredictable.
And yet, in the overall sense of the recent shifts in global politics, the results are predictable. What is clear is that people across democracies are fed up with the Left and their stretched domains. Here, the power accorded to the fringes of the Left by agenda-chasing governments and ideology-driven media has delivered votes to the Right.
From the European Union (EU) to the United States (US), the use-by date of the Left agendas has been rejected in electoral battles. The commonality in the way Americans and Europeans voted centres on the inability or unwillingness of governments to tackle illegal migrants wreaking havoc in these geographies. High inflation led by the Ukraine-Russia war is another concern, along with recession and the lack of jobs.
The commonality in the way Americans and Europeans voted centres on the inability or unwillingness of governments to tackle illegal migrants wreaking havoc in these geographies.
The case of the world’s largest democracy—India—is unique: despite narratives, the country refuses to be cleaved into a Left-Right divide, even though the third term of Prime Minister Narendra Modi has been labelled ‘Right’. Modi will now have the company of Trump as being labelled anti-democratic, even though their democracies voted them back to power—Trump for a second term and Modi for a third.
Beyond these labels lie bigger questions about how Trump’s second—and final—term will play out and what his voters and the world at large can expect. Under his “Make America Great Again” electoral stance, he made 20 promises. These include sealing the border, ending outsourcing and turning the US into a manufacturing superpower, defending free speech, restoring peace in Europe and West Asia, maintaining the US dollar as the world’s reserve currency, keeping men out of women’s sports, and deporting pro-Hamas radicals and making college campuses “Safe and Patriotic Again”.
Underlying several of these 20 core promises is a perception that the US is a declining power, which Trump will attempt to change. His first few moves, therefore, will be around security and geopolitics. In the Russia-Ukraine war, which both Russia and the West wish to end, Trump will wade in and be counted. A new deal around a new compromise, recognising new red lines, will usher in an uncomfortable peace in the region. Kyiv will likely lose some of its territory, Moscow will get a face save, and Brussels will continue to hold peace conferences while twiddling its thumbs.
Trump will also enforce his earlier demand on Brussels—to finance its own security. So far, Europe’s security cover has been provided by the US. In his first term, Trump had made it clear that the EU would have to pay for its security, with 2 percent of its GDP. He is likely to revise that demand alongside more Europeans in military service. Compliance by the EU will be a key determinant of the degree of US presence in the North Atlantic Treaty Organization (NATO). Germany has begun conversations around conscriptions; other countries will follow.
A new deal around a new compromise, recognising new red lines, will usher in an uncomfortable peace in the region.
The other war—between Israel and Hamas and Hezbollah, supported by Houthis and Iran—will get a different treatment. He is likely to ignore pressures of moral support to Hamas domestically while engaging the region. Deporting “pro-Hamas radicals” is easy in speech but may be difficult to execute. Iran is already feeling the first impact of Trump, with its currency crashing soon after Trump’s victory; how finance pressures security remains to be seen.
In his first term, Trump called out China. As his second term begins, China’s President Xi Jinping is already making conciliatory statements seeking ways to get along. “History has shown that China and the United States benefit from cooperation and suffer from confrontation,” Xi said. On his part, Trump, while countering China, will likely have a more transactional approach.
This approach will trickle down to India as well. In his first term, Trump promoted defence partnerships and arms sales to India. This is likely to continue. Here, the arena of transaction is the Indian Ocean Region. So, surface-level changes aside, expect the overall direction of the Quadrilateral Security Dialogue (Quad) to continue.
The region also houses Bangladesh under Chief Advisor Muhammed Yunus. Here, Trump’s engagement is likely to get tougher, his support to Hindus and condemnation of the “barbaric violence” against them stronger; without addressing the violence, Yunus has sent a message of “peace, harmony, stability, and prosperity for all”. How this translates into the end of violence against Hindus present there will be watched closely. And whether Trump’s support for Hindus extends to the community under attack in Canada, whose Prime Minister Justin Trudeau has been whitewashing the crimes, remains to be seen.
For a long time, Trump supporter and the world’s wealthiest man Elon Musk has been complaining about over-regulation and the accompanying fines as “lawfare”. Musk is likely to head a new government efficiency commission tasked with cutting US$2 trillion from the US$6.75 trillion federal budget. Not one to stretch time, the US can expect quick recommendations and actions. This will hurt a few incumbents in the short term but will be good for the country in the medium term, the results of which will show up before Trump’s term ends.
Musk is likely to head a new government efficiency commission tasked with cutting US$2 trillion from the US$6.75 trillion federal budget.
A regulatory rethink of the sort with two mega disruptors at the wheel will result in speedy growth. This is something India started in the second term of Modi when Parliament enacted the Jan Vishwas (Amendment of Provisions) Act in August 2023 to decriminalise a few economic offences. But this step is merely the framework of a larger rationalisation ahead—out of 26,134 imprisonment clauses for doing business, this law decriminalised only 113. Jan Vishwas 2.0 is underway.
At the Union Government level, the task is not as big: 5,239 clauses need to be rationalised. Once done, this will reduce rent-seeking and corruption by the bureaucracy, India’s homegrown deep state that is unwilling to change. It is up to the Union Minister of Commerce & Industry, Piyush Goyal, to own this and usher in change rather than attributing challenges solely to the industry. He has the data, he has the mandate, he even has the intent, but all of it seems to be getting hijacked by inertia. Perhaps Musk’s approach could serve as an inspiration for Minister Goyal.
There is an unintended consequence of Trump wanting to turn the US into a manufacturing superpower. It would mean an inward-looking economic entity. Trump will attempt to make the US attractive to entrepreneurs from across the globe, particularly in cutting-edge industries. But how that will translate into higher labour wages is unclear. For countries like India or Vietnam that wish to expand their manufacturing, it would mean in being direct competition with the US.
An inward-looking economy will also mean a rationalisation of tariffs. Here, countries such as India will be on the back foot. In his first term and the run-up to his second term, he had termed India a “tariff abuser”. A low-hanging political fruit, tariffs will be an important conversation between the two democracies. As India’s second-largest trading partner, trade is a glue between the two countries.
Trump will attempt to make the US attractive to entrepreneurs from across the globe, particularly in cutting-edge industries.
But with trade at US$118 billion against a GDP of US$4 trillion, it is nowhere close to where it should be. As a US$10 trillion economy, trade should organically rise to US$300 billion. The challenge, however, is to take it to US$1 trillion. Managing tariffs, therefore, will be a crucial point of bilateral negotiations. Both countries need to take a grand strategy approach to trade and economics, merging security, technology, and strategy into the economic discourse.
The last leg of Trump’s economic policy could see a legitimisation of cryptocurrencies. Much of that is easier said. Cryptocurrencies come with their own set of challenges. Even a country as technologically advanced as the US will not be able to make this transition without hurting its people. Work on legitimising cryptocurrencies will continue with great fanfare, but it is unlikely that the country will shift.
The power of the dollar as the world’s reserve currency lost its credibility when the West (the EU and the US) ejected Russia from SWIFT. On the contrary, it has forced the rest of the world to think about alternatives, such as the common currency creation by BRICS nations. Embracing cryptocurrencies alone will not deliver credibility; bringing Russia back into SWIFT could—the chances of which seem high in Trump’s second term.
The power of the dollar as the world’s reserve currency lost its credibility when the West (the EU and the US) ejected Russia from SWIFT.
Finally, there are other issues, such as visas. Here, despite Trump’s goal to “stop the immigration invasion,” Indians have a better shot. It is not immigrants that Trump is likely to stop or deport; it is illegal immigrants. Most Indians enter the US through the front door. Minor changes in immigration policy notwithstanding, the US will remain open to talent and, hence, Indians.
Above all, the return of Trump shows how mainstream media, with all its biases, narratives and ideologies, has become irrelevant to voting outcomes. Too busy endorsing Democrats, too obsessed with a far-Left future and too deaf to voices on the ground (and on podcasts), the US mainstream media will continue to condemn voters who have shifted lock, stock, and conversations to X, which Elon Musk defined as “real-time source of truth”.
Gautam Chikermane is Vice President at the Observer Research Foundation.
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Gautam Chikermane is Vice President at Observer Research Foundation, New Delhi. His areas of research are grand strategy, economics, and foreign policy. He speaks to ...
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