Merchant or Messiah: Why Trump’s second term may be worse than the first

Donald Trump has not merely won but has achieved an electoral triumph, securing victory not only in terms of electoral votes but also in the popular vote count of Americans who chose him. This is only the second time in the past 35 years that a Republican candidate has achieved this feat. The election results reveal a broad shift in preference towards Republicans, who now control the Senate and hold a majority in the House of Representatives.

The question, however, is whether the ‘Trump agenda’ can realistically be implemented. This agenda successfully mobilised conservative and often abstaining Americans frustrated by the excessive progressivism of the Democratic Party, yet it raises bewilderment and apprehension among experts and the American establishment.

In the new iteration of ‘trumponomics’, alongside tax cuts and deregulation, Trump promises to focus on mass deportation of illegal immigrants, raising import tariffs, boosting oil production, and curbing the independence of the Federal Reserve. The logic is that deregulation, fiscal stimulus, and oil production will spur economic growth and offset the inflationary impact of higher tariffs. Economic analysts question the realism of this scenario, suggesting that it might yield a short-term boost but could result in higher inflation and slower GDP growth by the end of Trump's presidency than if these policies were not enacted.

In foreign policy, Trump is likely to adhere to a transactional approach. However, most of his specific proposals, particularly regarding the Russia-Ukraine conflict, are so vague that they appear plausible primarily due to their lack of detail. Since Trump’s last term, the world has changed significantly; the West is under pressure from an authoritarian coalition, and the credibility of Trump’s threats may not be as high as he perceives. A transactional approach, combined with Trump’s and his counterparts’ tendencies towards escalation, could lead to dangerous developments.

During his previous term, Trump failed to follow through on many of his most controversial and risky campaign promises. However, today he re-enters office under fundamentally different circumstances: on a wave of triumph, with experience in political battles, and surrounded by numerous supporters actively devising scenarios to realise his more unconventional plans. At the same time, the influence of professionals in his circle has diminished. Thus, while Trump may be unwilling to fulfil some of his more grandiose promises, his actual policies could turn out to be far more messianic than transactional.

Progressives and abstainers: who ensured Trump's triumph

By far, the big news is not merely that Trump won the presidential election but the resounding nature of his victory. Trump secured not only the electoral votes but also, for the first time, won the popular vote, marking a significant achievement in American politics. The last time a Republican candidate achieved this was in 2004 with George W. Bush’s second term, and before that, in 1988. This marks only the second ‘pure’ Republican victory in the last 35 years, spanning nine presidential elections. A map compiled by Newsweek magazine based on exit polls shows that there are almost no states where Trump did not improve his performance compared to 2020. According to the New York Times, 90% of counties where votes have been counted shifted towards Trump compared to the last election. Trump’s victory thus represents not only a personal win but a broader shift in favour of Republicans, who have secured control of the Senate (with 52 seats), a majority in the House, and victories in 8 out of 11 gubernatorial races.

As predicted by analysts on the eve of the election, Trump’s success is largely due to the Democrats losing support among key voter groups that traditionally backed them – primarily non-white voters (especially Latinos), blue-collar workers, and those without higher education (→ Re: Russia: Tuesday of Discord). The prevailing explanation for Trump’s recent success is that he managed to mobilise a group of masculinity-oriented voters (both white and Latino) who previously did not vote at all. This group, well represented on social media and as listeners of non-political podcasts, felt excluded from the political narrative and stigmatised by the chorus of Democratic progressivism. However, they were motivated to turn out by Trump, who became a beacon of political de-marginalisation. Not only had they previously avoided elections, but they also had not participated in polling, leading to yet another miscalculation by pollsters regarding Trump’s standing. After processing 70% of ballots, Trump leads Harris by 3.3 percentage points and 3.7 million votes – a far cry from the close race that pollsters had predicted.

The radicalization of Trump’s anti-progressive agenda brought new voters to the polls who had previously believed that voting was pointless in the face of ‘deep state’ control over outcomes. Meanwhile, traditional Republicans stayed loyal, voting for Trump despite any misgivings, as noted by Ivan Kurilla, a historian of Russian-American relations, in a commentary for Re: Russia. The Democrats’ progressive agenda over the past 10-15 years, while radicalising, failed to expand their base to the left but led them to lose ground in the political ‘centre’, resulting in their systematic defeat in this election. Many, particularly among Democrats, believed Trump’s 2016 victory was an anomaly and that Biden’s 2020 win represented a return to normalcy. In fact, Trump’s first win marked the start of a new political trend, while Biden’s 2020 victory was a pandemic-related fluke. Trump’s current triumph marks a return to that trend – a trend Democrats have struggled to fully understand or respond to.

A detailed analysis of the election results is still to come, once all ballots are counted and the extent of Republican mobilisation and Democratic demobilisation becomes clear. For now, the central question is how dangerous Trump’s victory might be for America and the world. Capturing the support of radical voices and social media abstainers is one thing, but what happens if online trolling transforms into the agenda of a sitting president?

The 'Trump agenda' rests on four pillars: domestic political conservatism, plans to reform the American state to make it both smaller and stronger, an upgraded version of first-term 'Trumponomics', and a form of confrontational isolationism in foreign policy. The last two elements are especially significant, as they could have substantial global consequences, making them the most critical for international relations.

‘Trumponomics’ upgraded

The new 'Trumponomics' formula promises Americans 'skyrocketing incomes, zero inflation, a sharp increase in jobs, and unprecedented middle-class prosperity', as Trump presented it at the Republican Party convention. Beyond the tax cuts initiated during his first term, the new administration, according to campaign promises, will focus on deregulation, raising import tariffs, mass deportations of undocumented immigrants, promoting oil production, and limiting the independence of the Federal Reserve (the Fed). Trump outlined these steps in a programme interview with Bloomberg.

Pressure on the Fed is necessary to avoid raising interest rates, Bloomburg explains. Since most of Trump’s proposals are inflationary, an independent Fed would likely counter them by tightening monetary policy, which could slow economic growth. Trump’s team claims other measures – tax cuts, deregulation, and increased US oil production – will stimulate growth while exerting a disinflationary effect to offset rising prices from higher import tariffs. This logic behind the new 'Trumponomics' was explained by Michael Faulkender, the chief economist at The America First Policy Institute, which includes several members from Trump’s first administration. Unlike Joe Biden, who significantly reduced the issuance of new drilling permits, Trump has promised to issue them freely, combined with tax incentives, according to Reuters. The old Republican slogan ‘Drill, baby, drill!’ was heard regularly during the campaign.

Raising tariffs is the boldest and most radical measure, with the potential for broad global consequences. Trump announced during his campaign plans for a 10% to 20% tariff on all imports and a 60% tariff on Chinese imports. If implemented, and if US trade partners respond symmetrically, this could ignite a trade war that might reduce global GDP by up to 7%, IMF vice-director Gita Gopinath warned in an interview with the BBC. Politico called the potential consequences for Europe a ‘Trumpageddon’. Currency devaluation is China’s most effective tool to offset the impact of higher tariffs on its exports, Bloomberg reports. According to a Goldman Sachs forecast cited by the agency, the euro could depreciate against the dollar by 10% and the yuan by 12%. Both currencies began to weaken on Wednesday night as Trump’s victory became more evident, with dollar/euro and dollar/yuan trading volumes 20-30% above average, notes Reuters.

However, in assessing the potential impacts of 'Trumponomics 2.0', it’s important to note that its specifics are still largely undefined. Due to the high uncertainty, even potential beneficiaries – such as oil companies – are cautiously evaluating Trump’s economic ideas. While they would welcome corporate tax cuts mentioned during the campaign, they are wary of a trade war that could raise prices on imported equipment, analysts at S&P Global explain. Few industries would benefit unequivocally from Trump’s policies, according to experts from Thomson Reuters. For example, tech companies might gain from deregulation (a goal of all Republican administrations) but lose from higher tariffs. Analysts see only the crypto industry as a 'big winner' since Trump has pledged to remove some barriers in this area.

Clearly, the final tariff decision will likely be the result of negotiations with China and other partners. In discussing this, Trump has said that he could raise tariffs to ‘100%, 200%, 2000%' to ensure that China 'couldn’t sell a single car in the US’ However, this is less a preview of actual measures and more an attempt to raise stakes in upcoming negotiations. The scale of deportations is similarly uncertain, as experts say carrying out deportations on the proposed scale would be impossible. But even partial implementation of Trump’s plans is expected to harm the US economy, according to experts from the US-based Peterson Institute for the World Economy (PIIE). They modelled two scenarios: a milder one with a 10% global tariff and a 60% tariff on China, and a harsher one in which China and other trading partners respond with equal restrictions. The milder scenario would see 1.3 million foreign workers deported, while the harsher scenario would see 8.3 million deported, with the Fed’s independence weakened in both cases.

Both scenarios anticipate a sharp spike in inflation and a significant reduction in employment, especially in manufacturing and agriculture. The main difference lies in the extent of damage to households, businesses, and the broader economy. If Trump’s economic program isn’t implemented at all, PIIE experts estimate that US GDP will grow at an average annual rate of 1.9%, employment by 1.5%, and inflation will hold at 1.9% per year from 2025 to 2040. In the milder 'Trumponomics 2.0' scenario, US GDP in 2025 will be slightly higher than in the baseline; in the harsher scenario, it will be slightly lower. However, by the end of Trump’s second term, US GDP will be 2.8% lower than in the baseline in the milder scenario and 9.7% lower (a loss of $2.57 trillion) in the harsher one. Employment would initially rise but eventually fall below the baseline level. Inflation, however, would rise immediately. In 2026, it would be 4.1-7.4 percentage points higher than in the baseline scenario, gradually stabilising in the mid-2030s at around 2 percentage points above baseline levels.

The PIIE model predicts that only two other economies – China’s and Mexico’s – would experience challenges, with each country’s GDP falling by less than 1% below baseline by the end of Trump’s second term. Other major economies might not suffer and could even benefit slightly as the trade war makes Chinese goods cheaper. However, investment flows out of China would accelerate toward other regions.

Confrontational isolationism and its pitfalls

Although Trump's approach to foreign policy is considered isolationist (‘America First’), in reality this isolationism encompasses global objectives. In order to focus on America's problems, Trump envisages resolving most of the world's major conflicts by reaffirming the decisive and indispensable role of the United States in shaping the world order.

Trump's victory in this election was less of a surprise to the world than his first arrival in the White House, notes Peter Feaver, a professor of political science at Duke University, in his article ‘How Trump Will Change the World’. Based on the experience of Trump’s first term, Feaver believes we can imagine what his decision-making style will look like over the next four years.

Trump’s transactional approach to foreign policy will undoubtedly remain, viewing international relations as a series of more or less profitable deals. This approach, rooted in his business background, appears logical but has not yielded significant results. During his first term, Trump’s attempts to secure 'good deals' with leaders like Vladimir Putin, Ali Khamenei, Kim Jong-un, and Xi Jinping saw only partial success, largely with Xi, argues Paul Saunders, president of the Centre for the National Interest, writing in The National Interest. Trump’s most notable diplomatic success was the Abraham Accords, which normalised relations between Israel and the UAE, Bahrain and Morocco; however, recent events in the Middle East have shown that these agreements have not yet brought lasting peace to the region.

Key arenas for Trump’s transactional approach will include China, the Middle East, the Russia-Ukraine conflict, and relations with European NATO partners. His approach may be most applicable to the Russia-Ukraine conflict. According to well-known military expert Mick Ryan, a plan developed by National Security Council members from Trump’s first term, including Keith Kellogg and Fred Fleitz, envisions ending the war in Ukraine with a ceasefire, freezing the conflict along current front lines, creating a demilitarised zone, and abandoning NATO membership talks for Ukraine. However, mechanisms to implement this plan remain entirely unclear.

If Trump plans to achieve peace by trading Ukrainian territory, what does he expect in return from Putin, and why does he believe Putin would honour his commitments and not shift his stance on Kyiv later? Furthermore, the plan would require buy-in from European allies: as Fred Fleitz told The Financial Times, the US will insist that European troops be stationed in the Ukrainian demilitarised zone, not a NATO or UN contingent, and Washington itself will not participate in financing the mission. The plan thus involves unilateral coercion of Russia, Ukraine and the EU, who will be unhappy with various aspects of it. The lack of specifics is currently the strongest feature of this plan.

Imagining its actual implementation is especially difficult, given that competing factions within the administration are likely to battle for control over Trump’s foreign policy, as they did during his first term, writes Feaver. Currently, there are three groups with differing views on global security: isolationists who prioritise domestic issues, 'prioritisers' who believe the White House should focus on containing China, and traditionalists who advocate for projecting American power globally. The first two groups argue that Europe should take full responsibility for the 'Ukraine question', while the third, which includes several Senate Republicans, believes Washington should continue to influence the situation around Ukraine directly.

The Middle East will also demand significant attention, as it presents reputational challenges for Washington, notes Chatham House expert Professor Michael Cox. Due to continued US support for Israel, public trust in Russia and China has grown among Middle Eastern populations. In 2018, Trump and Israeli Prime Minister Benjamin Netanyahu derailed the Iran nuclear deal, and Cox suggests that Trump may revive a campaign to constrain the Iranian regime if he secures a second term. Richard Grenell, US ambassador to Berlin during Trump’s first term and a current candidate for Secretary of State, told The Financial Times that Trump might invite Netanyahu to Washington and urge him to negotiate with Hamas in exchange for the release of hostages. In any case, advancing the Abraham Accords will remain a top Trump priority.

Most likely, the central focus of US foreign policy will be containing China, whose rise is widely seen as an existential threat – a rare bipartisan consensus in the US Nevertheless, some in Trump’s circle, like Elon Musk, might push him to soften his stance toward Beijing. According to Cox, Trump’s return to office could, in China’s view, raise doubts about the US commitment to its allies in the region, including South Korea, Japan, and the Philippines. During his campaign, Trump questioned why the US should act as an 'insurance policy' for Taiwan without compensation. Trump’s supporters, however, are confident that he will implement a policy of maximum deterrence to dissuade China from attacking Taiwan, they told The Financial Times. Even so, substantial uncertainties remain.

Despite calls from Washington, only 23 out of 32 NATO countries spend more than 2% of their GDP on defence, and NATO members will likely face pressure from Trump on this issue if he wins a second term. This could particularly strain relations with Germany and France, who only recently met the 2% target, according to Fleitz. Elbridge Colby, a Pentagon official during Trump’s first term, told The Financial Times that the new administration is likely to prioritise alliances with countries like Poland, South Korea, India, and Israel, which are 'self-reliant and willing to act in pursuit of common interests'. In a similar vein, Grenell criticised the outdated mindset of Western European allies who still expect effective solutions from institutions like the UN Security Council. According to Grenell, under Trump, Washington would prefer to ‘form coalitions with those ready to take action’.

A chessboard of promises and magical realism

Trump’s sympathisers among traditional Republicans, classical liberal supporters, and optimistic experts and voters from the Democratic side hope that he will govern by the model of the 'Mexican border wall'. After promising to build it in 2016, Trump then stated that Mexico should fund it, a position that ultimately buried any serious plans for construction. Others point to his threat to 'withdraw from NATO': Trump leveraged this stance to pressure European partners to increase their contributions to the alliance’s budget. In other words, this group of voters and commentators hopes that Trump will fulfil his reasonable promises and ignore the unreasonable ones.

However, an alternative view is that Trump’s first win seemed to surprise even him, while Democrats controlled the legislative branch, and Trump, a newcomer to high-stakes politics and public administration, had neither his own team nor a solid grasp of the system, relying more on professional bureaucrats than true supporters of his ideas. Today, the situation is fundamentally different: Trump sees his victory as a providential triumph that validates his views, which clash with both progressive and conservative mainstreams. Now, efforts to translate his ideas into practical policy are backed by the AFPI and Heritage Foundation’s 'Project 2025'. This is an entirely new scenario. To what extent will a second-term Trump remain a pragmatic transactionalist, and to what extent might he embrace the role of a 'new order' missionary intent on eradicating 'progressive blight'?

Even if his approach stays grounded in ‘pure transactionalism’, Peter Feaver notes that the world has radically changed since 2016 and become a 'much more dangerous place'. The West is under pressure and attack from an 'authoritarian bloc' and appears far less powerful than it did a decade ago. As a result, Trump’s threats may now carry far less weight in the eyes of his counterparts than he assumes. As before, Feaver adds, his inner circle will see a struggle between MAGA ideologues and realists, but this time, the radicals will wield significantly more influence. 'Trump’s campaign rhetoric painted an apocalyptic view of the world, casting himself and his team as clear-eyed realists who grasp the dangers. But what they offer is not so much realism as ‘magical realism', filled with bravado and superficial solutions', Feaver concludes.

Much of what Trump promises appears either as bargaining chips or campaign exaggeration. His approach will undoubtedly follow a chessboard strategy – he will implement some promises while ignoring others, focusing voters’ attention on the former and diverting it from the latter. But no one – not even Trump himself, perhaps – can say which promises will fall into each category. At the same time, political polarisation will remain a central issue in US domestic politics, exerting a destabilising influence. As Ivan Kurilla notes in his commentary, political polarisation in American politics often leads to an uptick in foreign policy activity, a sort of externalisation of domestic conflict. Yet in the global arena, Trump’s tendency to raise the stakes will bring him face-to-face with counterparts who have studied his tactics and are equally inclined to play hardball. Whether Trump’s 'magical realism' will sway them remains an open question.