How Donald Trump’s America First agenda could provoke damaging trade wars

The decisive victory by Donald Trump sent Wall Street stocks to record highs yesterday but sparked warnings his America First agenda will provoke damaging trade wars.

New York-listed shares surged as the result paved the way for more tax cuts and less red tape in the world’s biggest economy.

The dollar also rallied and Bitcoin set a new record thanks to Mr Trump’s support for the cryptocurrency.

But an initial rally for London’s FTSE 100 fizzled out and European stocks fell as traders weight the impact of potential trade tariffs designed to protect American jobs – a policy likely to provoke tit-for-tat retaliation worldwide.

Goldman Sachs warned the disruption could knock 0.4 percentage points off UK GDP growth, further weakening the already dismal economic prospects expected under Labour over the next few years.

The FTSE 100 rose by as much as 130 points in early trading before giving up some of its gains

And the result was described as ‘Europe’s worst economic nightmare’ by Dutch bank ING, which said such a trade war could send the continent into a ‘full-blown recession’.

The dollar climbed sharply, leaving the pound close to $1.28, its lowest against the greenback for more than a year. Bitcoin passed $75,000 after Mr Trump embraced such cryptocurrencies – in contrast to Joe Biden’s administration.

But experts sounded the alarm over Mr Trump’s threat to impose swingeing tariffs on all imports, particularly those from China.

Higher tariffs on imports would mean higher inflation – and may mean central banks including the Bank of England have to slow the pace of interest rate cuts in a blow to borrowers.

The Bank is today expected to cut rates by a quarter of a percentage point, but all eyes will be on governor Andrew Bailey for clues about what the Trump win may mean for further reductions.

The strength of the US dollar – partly linked to higher bond yields – saw it gain ground against both sterling (pictured) and the euro 

Elon Musk and Donald Trump pictured at a rally together in Butler, Pennsylvania, on October 5 

Hours later, his American counterpart Jerome Powell, the chairman of the US Federal Reserve, will also be in the spotlight.

The Fed is also expected to cut rates today. But, as in the UK, investors are betting that the pace of those reductions will slow. That is because Mr Trump’s plan for tax cuts – while a boon for households and businesses – could revive inflation. The president-elect’s plans could, if enacted in full, add £6trillion to the US debt pile.

Analysts warned that more turbulence is likely to come as results of congressional results come in. A clean sweep, giving Mr Trump’s Republicans control of both the Senate and House of Representatives, would leave him with a free hand to enact all his plans.

■ Elon Musk was £11billion richer last night. The Tesla boss’s net worth surged to more than £205billion after shares in the electric car maker rose by 13 per cent as backers expected him to become an influential adviser to Mr Trump.

Mr Musk, 53, who also owns the X social media platform, has given about £100million to the Republican’s campaign. Mr Trump has said he will head an ‘efficiency’ commission and the tech boss has signalled he wants to slash £1.6trillion from the US federal budget.