FECIF Editorial

The theatre of Donald Trump has caused European leaders to review their current relationships both internally and externally. Whilst the focus to date has been on Global trade and Security the impact of Trump and his GOP allies has been dramatic and direct. He is being described as an existential threat to Global norms.

The risk of a rift within NATO has been played out since the day of the inauguration exacerbated by Trumps desire to secure a ceasefire in Ukraine at any cost, whilst Trumps statements on trade and Tariff’s have upturned the international norms for global trade. Trumps threats related to security guarantees are inter linked into trade, immigration and host of other demands that Trump believes might benefit the US or US companies operating globally. 

Donald Trump's influence on financial services in Europe is a little more complex. It could be described currently as creating an indirect rather than a direct existential threat. He is a strong supporter of Wall Street and the markets whilst wanting to curtail the power of overseas corporations in favour of their US competitors. While he may not be a threat to the entire financial sector, there are aspects to his policies and political approach that could create challenges or uncertainties for financial services in Europe.

1. Trade and Tariffs:

Trump's "America First" policies and trade wars, particularly with China and Europe, has led to uncertainty in international markets. While these trade conflicts do not yet fundamentally disrupt the European financial services industry, they do introduce uncertainty.  So far, they have not impacted European markets, but the introduction of tariffs may well undermine European growth and in time reduce returns for private investors.

2. Regulatory Environment:

Trump has already demanded deregulation in the U.S., with Elon Musk’s DOGE team routing out waste and removing regulatory bodies. If European financial services firms want to operate in the U.S. or deal with American financial institutions, his administration's policies could create more friction or require adjustments in compliance strategies, potentially increasing costs or reducing market access.

3. Currency and Global Markets:

Trump's influence on U.S. monetary policy, his stance on the U.S. dollar, and his tendency to criticize Federal Reserve policies has an indirect impact on global financial markets. Changes to the value of the dollar or trade tensions can affect European firms, particularly those with U.S. exposure or dependencies on stable global markets. Uncertainty in currency markets can mean that individuals find it difficult to make decisions about where to invest and hold off on important financial planning.

4. Geopolitical Instability:

Trump's approach to international relations, including his less conventional diplomacy and withdrawal from international agreements (like the Paris Climate Accord or the Iran Nuclear Deal), created geopolitical instability. His Afghanistan withdrawal agreement led to the Taliban retaking the country in days and his urge to  “settle” the Ukraine war could lead to considerable security risks for Europe. This could lead to unpredictable effects on European markets, particularly in terms of risk, investment, and the stability of international financial systems.

5. Impact on Global Institutions:

Trump has already made clear his scepticism toward multilateral institutions like the World Health Organisation, the World Trade Organization (WTO) and the International Monetary Fund (IMF). His withdrawal or lack of cooperation with such institutions could result in weaker global financial infrastructure. Europe, heavily reliant on these institutions, would need to adapt to any changes resulting from Trump's policies toward these bodies.

The last few days have seen a softening of Trumps wildest demands and statements as European leaders met with him and remind him of the binding relationships that still exist.  The European “shuttle diplomacy” commenced with a brief meeting between Poland’s President Andrzej Duda on the sidelines of the CPAC, and was rapidly ratchet up first with a visit to the White house by France’s President Macron, followed by the UK’s Prime minister Kier Starmer. The latter two meetings being described as a “bromance” as the European leaders attempted to realign Trumps” America First” vision with the transatlantic alliance of “equals”.

While Trump himself is unlikely to be an "existential threat" in the strictest sense, his policies can certainly influence market volatility, regulatory frameworks, and international relations. These can challenge European regulators and financial institutions, particularly those with global exposure. His unpredictability and strong rhetoric can contribute to an environment of increased risk, which often leads to financial uncertainty.

Navigating through the uncertainty of Trumps influence on personal finances, Interest rates, Mortgage rates, investment returns, and currency can be difficult. Financial Advisers can play an essential role in supporting clients through such challenging times and particularly during disruptive times when unforeseen risks create uncertainty. FECIF has a key role in supporting the work of Financial Advisers across Europe by continuing to build strong relationships with EU institutions in order to better serve the communities we represent.  Effective regulatory policies that support business and encourage innovation whilst protecting consumers outcomes can and should be the future of the industry.   FECIF is a key partner in this process.