At the Intersection of Geopolitics and Geoeconomics

North America

• In the 2024 US elections, Donald Trump surprised many by winning swing states decisively, outperforming expectations despite polls predicting a tight race. His success was largely driven by stronger-than-expected support among rural white voters and younger male voters, with Trump securing 55% of the vote among 18-29-year-old men, a significant shift from the 2020 election. The Republican Party also made significant inroads in the Senate, with victories like Bernie Moreno defeating Democratic Sen. Sherrod Brown in Ohio, and Jim Justice winning West Virginia’s Senate seat. In contrast, Vice President Kamala Harris failed to expand Democratic margins in urban areas, as seen in counties like Fulton (Georgia) and Mecklenburg (North Carolina), where her numbers were similar to Biden’s in 2020. The GOP also made substantial gains among nonwhite voters, particularly Black and Hispanic communities, with Trump’s share of the Black vote rising to 15%, up from 8% in 2020, and securing 41% of the Hispanic vote.
• In an unexpected and controversial move, The Washington Post and Los Angeles Times chose not to endorse a presidential candidate in the 2024 election, breaking with longstanding traditions of publicly supporting nominees. This decision, reportedly influenced by their respective billionaire owners, Jeff Bezos and Patrick Soon-Shiong, has drawn criticism from media experts like Margaret Sullivan and Jelani Cobb, who argue that the silence undermines the papers’ public duty and equates two vastly different candidates. The decision has led to resignations from editorial staff members at both newspapers, including LA Times editorial editor Mariel Garza and Washington Post columnist Robert Kagan, who see this choice as an act of undue neutrality amid a critical election. Meanwhile, other prominent newspapers, including The New York Times, had endorsed Kamala Harris, warning of the risks posed by Trump’s return.
• Boeing’s nearly two-month machinist strike concluded as union members voted 59% in favor of a new contract on November 4th, achieving a 38% wage increase over four years and $12,000 in bonuses. This contract also includes a commitment to build Boeing’s next aircraft in Seattle, ensuring jobs remain in the region. Boeing’s CEO, Kelly Ortberg, acknowledged the challenges but expressed optimism, highlighting that the strike, which cost Boeing $1 billion per month, needed to end for recovery. The new deal excludes pensions, a key union demand, reflecting broader trends away from defined-benefit plans across the industry.
• US Secretary of Defense Lloyd Austin authorized the deployment of a THAAD missile defense system and its US military personnel to Israel, following increased missile attacks from Iran. These attacks, including an incident on October 1st with nearly twice the volume of ballistic missiles compared to April 13th, underscore heightened tensions and the need for robust defense measures. Initial personnel and components arrived on October 14, with full THAAD capability expected soon. This deployment aligns with recent US security reinforcements in the Middle East, including extending the USS Abraham Lincoln’s presence in the region.
• Market Implications: Trump’s presidency is anticipated to strengthen the US dollar (at least initially), with investors expecting his policies to drive higher growth and thus equities. The bond market, however, sends signals of concern and thus the higher yields on long-term Treasuries. This scenario could keep the Federal Reserve inclined toward elevated interest rates, supporting the dollar’s value. Meanwhile, Trump’s tariff proposals, skepticism of multilateral alliances, and demand for increased European defense spending are likely to restrain global growth, adding to the dollar’s appeal. Policies favoring deregulation, tax cuts, increased oil production, and strict immigration control could boost sectors like banking, technology, defense, and fossil fuels. The proposed corporate tax rate cut to 15% from 21% could lift S&P 500 earnings by around 4%, per Goldman Sachs. Conversely, sectors affected by tariffs—such as semiconductors, autos, and green energy—could see volatility.

Europe

•  German Chancellor Olaf Scholz dismissed Finance Minister Christian Lindner on November 7th, signaling the collapse of Germany’s coalition government. Scholz cited Lindner’s refusal to compromise on economic recovery and budget issues as reasons for his dismissal. A confidence vote is set for January 15th, with early elections likely in March as a result of the coalition breakdown. This development follows months of internal disputes within the coalition of Social Democrats, Free Democrats, and Greens, worsened by economic struggles and the rise of the far-right Alternative for Germany. Polls show 82% of Germans doubt the coalition’s ability to solve economic issues.
• Spain experienced catastrophic flooding after extreme rainfall hit the southern and eastern regions, particularly in Valencia, where 202 of the 205 fatalities occurred. Entire towns were submerged, cutting off access to critical infrastructure, with thousands of residents trapped or displaced, and extensive damage to homes and businesses. Meanwhile, Spain’s economy has shown notable strength, expected to grow 2.7% in 2024, driven by a record 85 million tourists and significant foreign investment in renewable energy and services. With these factors, Spain outperformed the Eurozone’s 4.2% growth since 2019, though challenges like high debt and slow productivity growth persist.
• Georgia’s European Union (EU) accession efforts have stalled, as indicated by an October 30th EU report, citing concerns over democratic backsliding under the Georgian Dream party, which recently won a contentious election with 54% of the vote amid allegations of election fraud and anti-Western policies. The party’s adoption of laws similar to Russia’s, like the “foreign agents” and “anti-LGBT propaganda” laws, has distanced Georgia from EU standards. In Moldova, President Maia Sandu won re-election on November 3rd in a high-stakes contest amid alleged Russian interference, securing 55% of the vote in a choice that reinforced Moldova’s pro-EU stance. This election strengthens Moldova’s path toward EU integration, contrasting with Georgia’s stalled progress.
• France is becoming increasingly isolated within the EU as it resists an impending trade deal with Mercosur, fearing an influx of agricultural imports from Latin America that could harm its powerful farming sector. President Emmanuel Macron faces domestic opposition after EU and national elections setbacks, which have weakened France’s influence over EU policy. The EU, led by Germany and Commission President Ursula von der Leyen, is pushing to finalize the agreement by early 2025 despite France’s calls for environmental and agricultural protections.
• Up to 12,000 North Korean soldiers are believed to be in Russia through a pact with Moscow, aiming to bolster Russia’s forces amid recent gains in eastern Ukraine. North Korean troops aiding Russia in Ukraine were shelled by Ukrainian forces in the Kursk region, marking the first reported strike on these forces, according to Ukraine’s Security Council official Andrii Kovalenko on November 5th. Russian forces, with a recruitment surge, have captured areas including Vuhledar and advanced up to 9 kilometers in Donetsk. Meanwhile, long-range Russian attacks continue, with six civilians killed in Zaporizhzhia.
• Market Implications: Germany has lagged the EU average since 2021 and is expected to shrink for the second year running in 2024. European equity markets may face downward pressure as Germany’s weakened economy affects the broader Eurozone, especially impacting industrial sectors dependent on German exports. Germany’s recession is hitting key sectors, particularly manufacturing and industrials, with pronounced impacts on the automotive and chemicals industries. The automotive sector, Germany’s economic backbone, faces slowed demand due to rising costs and reduced exports, likely affecting European stock values in companies dependent on German production, such as tire, auto parts, and heavy machinery firms. In chemicals, German companies grappling with high energy prices see weakened competitiveness, impacting firms across Europe. Similarly, construction—reliant on German material imports—is expected to slow, affecting related stocks and high-yield bonds within these sectors. If Germany’s recession intensifies, the ECB may face pressure to cut rates, stabilizing bond prices but potentially exacerbating stock market volatility across Europe. 

China & India

• China’s central bank, the People’s Bank of China (PBOC), lowered key lending rates on October 21st to support economic growth as the country faces slowdowns. The one-year loan prime rate dropped from 3.35% to 3.1%, while the five-year rate decreased from 3.85% to 3.6%. This marks the first rate cut in three months, following a September reduction in other rates, including the reverse repo rate, as economic data showed only a 4.6% GDP growth in the third quarter. Analysts note that while these measures help, substantial fiscal action is needed to drive significant economic recovery.
• BYD, the Chinese electric vehicle giant, reported record-breaking revenue of over 200 billion yuan ($28.2 billion) between July and September 2024, surpassing Tesla’s $25.2 billion for the first time. This 24% increase year-over-year is supported by Chinese government subsidies, which encourage consumers to replace gasoline cars with electric or hybrid models. BYD achieved record monthly sales during the quarter, showing continued strong demand. However, its international expansion faces challenges, including newly implemented EU tariffs of up to 45.3% on Chinese EVs and a 100% import tax from the US and Canada. China’s domestic market saw 1.57 million applications for a national subsidy on green vehicle purchases.
• India and China recently reached a border disengagement agreement, following a meeting between Prime Minister Narendra Modi and President Xi Jinping at the BRICS summit in Kazan on October 23rd. The deal marks a diplomatic step toward reducing border tensions that have persisted since the 2020 standoff, but Indian officials remain cautious, as broader issues and distrust between the nations linger. This engagement allows India to reestablish limited communication channels, including suspended military, economic, and diplomatic dialogues. However, India continues strengthening partnerships with allies like the US and focusing on national resilience, viewing China as a significant regional and strategic competitor.
• Canada-India tensions intensified last month as Canadian officials accused Indian Minister of Home Affairs Amit Shah of orchestrating violence against Sikhs, including the 2023 murder of Sikh leader Hardeep Singh Nijjar. In response, Canada expelled six Indian diplomats in early October, heightening the likelihood of increased Indian cyber espionage. Visa processing has been impacted, with Canada reducing its immigration staff in India from 27 in October 2023 to just four presently, causing delays for Indian students and workers. Despite these diplomatic strains, trade, especially Canada’s export of pulses to India, remains largely unaffected as both countries seek to maintain economic ties.
• Market Implications: China’s recent cut to its bank Reserve Requirement Ratio (RRR) by 50bps aims to bolster economic recovery, releasing roughly 1 trillion yuan (about $140 billion) to encourage liquidity. This, along with similar measures taken over the course of the last 2-3 months, increases the possibility of greater volatility in Asia markets, especially if we consider Trump’s policies. The yields on 10-year Chinese government bonds, currently around 2.13%, may stabilize or decrease due to increased liquidity, which supports lower borrowing costs. In equity markets, the RRR cut could offer a lift to Chinese stocks, especially in the banking and real estate sectors, both of which benefit from enhanced liquidity and financing availability. Property stocks, which have faced significant stress, may see some relief as banks are encouraged to extend credit, although risks remain due to existing debt levels and weak property demand. Likewise, sectors with large government backing, such as construction and tech infrastructure, are likely to respond positively as the lower RRR makes financing more accessible for these capital-intensive industries. On the other hand, India’s economy is widely expected to pick up in growth this quarter and in the year ahead as consumer spending increases, inflation subsides, and agricultural output improves following favorable monsoon conditions, assuming that the international outflows from its market are contained. 

Suggested Reading

How Trump Will Change the World

Peter D. Feaver, Foreign Affairs

Missing in Europe: A Strong Leader for a New Trump Era

Jim Tankersley and Aurelien Breeden, The New York Times

The BRICS Summit 2024: An Expanding Alternative

Council on Foreign Relations