Trump’s ‘risky victory’ threatens to inflame geopolitical and economic tensions

Trump’s clean sweep in the US elections last week is a “risky victory” that threatens to inflame a range of geopolitical and geoeconomic tensions, including war in Europe, deglobalisation and inflation, warns former Portuguese deputy prime minister and minister of foreign affairs Paulo Portas.

Speaking at the annual Brokerslink conference in Abu Dhabi, Portas said that Trump’s “total” victory – where he and his Republican party won the presidency and control of the house and senate, alongside their domination of the supreme court – is unusual.

He told the audience of brokers, risk managers, insurers and service providers that the US president is normally the world’s most powerful man but also one of the most scrutinised. However, for the next two years until further elections take place for the US senate and house, Trump will face few, if any, checks and balances.

“For next two years, as we usually say when we ski, we are on a black piste,” said Portas, who also led the moderate conservative CDS PP party for 16 years.

Noting that Trump has so far appointed a government of loyalists, such as Elon Musk and Robert Kennedy Junior, Portas believes that big global geopolitical risks following the US election victory will centre around existing wars in the Ukraine and Middle East, as well as tension between China and Taiwan.

Portas said there is likely to be a big change in US policy towards Ukraine, which could cause severe problems for Europe.

Trump is an isolationist and campaigned with non-specific commitments to build peace agreements. This is clearly harder to deliver in practice and Trump’s promise to solve the war in Ukraine within 24 hours of victory was not kept.

“But if the American administration gives Mr Putin a victory in Ukraine, can you tell me why Russia should stop at Ukraine?” asked Portas.

Putin has made several interventions outside of Russia over the last 25 years in former Soviet states, so the Balkans, most of which are members of NATO and the EU, could be the next target for the Russian president, he said.

With Trump distancing himself from NATO and, potentially, the promise that if one member is attacked all others will respond, this create a possible problem for Europe. “You have to adapt to this critical issue,” Portas told the conference delegates.

The second critical geopolitical issue is the Middle East, where Trump is politically close to Israeli president Benjamin Netanyahu. “I am not sure the relationship from Trump with the Middle East will be balanced,” said Portas.

The big question is what peace would look like and how would it satisfy all parties? “If you want peace to start, you have to have an idea about the day after. What do you want from Gaza? What do you want from Lebanon? That is the critical question… You have to give some room to diplomacy but that route is much reduced,” said Portas.

Another issue for risk managers to keep in mind is Trump’s changing stance towards Taiwan during the election when he accused the country of stealing jobs from US workers. Musk has previously suggested that Taiwan should be controlled by China. “This could mean a change of policy towards Taiwan,” said Portas.

When it comes geoeconomic challenges following Trumps victory, further deglobalisation and the economic impact of tariffs, which has promised to put on certain imposts, are big risks for many companies.

It remains to be seen if any tariffs are introduced and whether they are bilateral or multilateral, said Portas. But the big risk is that systemic protectionism sets in and harms global growth, threatening the “fragmentation of globalism”, he added.

The potential fight between the US government and the country’s federal reserve over the banks independence is another risk to watch, with Trump wanting to control monetary policy, continued Portas. He added that there are fears among some that tariffs, tax cuts and mass deportation of immigrants under Trump could lead to higher inflation in the US and then spread elsewhere.

In his far-reaching speech, Portas went on to argue that the EU is facing structural problems around innovation that is ultimately hitting its GDP and needs addressing.

“Europe has three problems. One, we innovate less than others. Second, we are becoming the old continent of the world. Third, we have a productivity gap. If we innovate less, the gap will grow,” he said.

“The difference between Japan and Europe is Japan is the oldest country in the world but it innovates a lot. Europe is becomming older and innovating less… So we need to solve our demographic problem because we have scarcity of human resource already,” he continued.

Portas believes this problem can be addressed through various government policies but, ultimately, cannot be fixed without immigration.