Research published by Blue Lotus Research on December 4, 2024

 

(12 Pages, 20 graphs and tables)

Listen to analyst’s audio summary Amid a divided America, Trump lovers tend to exaggerate his abilities while Trump haters are eager to dismiss his chances of success. The real outcome of Trump 2.0 may well be in the middle; MAGA reflects the American consensus to address three key issues: the federal deficit, the trade deficit and the related immigration abuses. To do so Trump/MAGA must overhaul American economy across labour, trade and fiscal through overhauls in immigration, tariff, healthcare and energy. The daunting task may lead to a delayed/staged trade war, which in our view, might lead to China to have a policy overdose; Our portfolio of Macro Mauled Champions (MMC) can benefit from enhanced visibility of a delayed trade war between US and China. Despite Macro Champions (DMC) can withstand a continuingly challenging macro environment, including the trade war.   The scenario of a delayed trade war with China The biggest argument against an immediate trade war with China, epitomed by an immediate tariff hike towards the 60%'s, is US inflation. This inflation threat is contributed more by the mass deportation of illegal aliens than a price hike by Chinese goods. The CPI headline number matters less than voters' opinion, which can change in a whim. So far, the market has placed the trust behind Trump.   It is disruption within more likely to push trade war to 2H25 Half of Americans who voted for Trump likely endorse his immigration policy, which means they must be ready to sacrifice some life qualities from losing cheap cost, more so if offset by a tax cut. We would expect the MAGA immigration to proceed, which is an enormous accomplishment the longevity of this issue, but still the burden of inflation will be falling unevenly to the low-income population living from mouth to hand. The question is for how long can public opinion tolerate a life quality downgrade, as well as media reports of protracted legal battles. A Democrat come back in 2026 Mid-Term election will weaken MAGA 2.0.   How does Trump overcome what he cannot do? In our November 7th note, , we outlined challenges Trump faces in his second term to accomplish his MAGA goals.

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