What impact will Donald Trump’s massive victory have on Switzerland?

In his webinar on October 23, 2024 for members of the CFA Society Switzerland entitled: “Why the US elections may not change Europe’s precarious situation”, experienced macroeconomist Christian Takushi examined complex geopolitical issues that influence US foreign policy and therefore also Europe. In it, he emphasized the special nature of European stability and attributed its prosperity to US military protection, affordable Russian energy and competitive goods prices from China.

thebroker talks to Christian Takushi, macroeconomist and geopolitical strategist, member of the CFA Institute and the Swiss Financial Analysts Association, who predicted Donald Trump’s recent victory.

In the webinar on October 23, you not only predicted a victory for Donald Trump, but also in the Senate and the House of Representatives (not yet confirmed). What impact will this victory have on transatlantic relations?

Christian Takushi: These US elections will have a significant and most likely negative impact on the transatlantic relationship between the United States and Europe. This relationship was already at its lowest point in history before November 5th.

The clear mandate that President-elect Trump has received from the American people changes everything. The problem for Europe is that our leaders do not recognize, or rather deny, the precarious state of relations between the US and Europe and our own geopolitical-economic predicament. Some of our leaders have even sent taunts, warnings and ultimatums to Washington.

Americans now know that the overwhelming majority of European citizens and leaders pretty much loathe Trump and all Americans who support him. Our leaders believe that if we send a message of congratulations and celebrate our shared values, all will be well. Not really. The truth is that the values of the US and Europe are drifting apart.

Over the past 10 years, more and more Americans have been returning to their traditional family values and rejecting what they see as our gender-equitable, green experiment here in Europe, which has also found favor in major U.S. cities.

We should pay attention: An overwhelming majority of Americans have voted for a leaner state, unrestricted free speech and the right to bear arms to defend that free speech. Here in Europe, only about 20 percent of voters would support this, primarily because it would come with less government-organized social security. The events of last summer have already led many Americans to conclude that Europeans’ view of free speech is much narrower than theirs.

The values we still share are precious, but they are offset by the fact that we are increasingly competing politically and economically with the United States. Despite all the lip service we pay to our friendship, we are becoming de facto political and economic competitors and possibly enemies. For many Americans, Europe has become a military ally and competitor, acting as a free rider.

Missed opportunity – Our response to the US election was somewhat ill-advised and has added further damage to a fractured relationship. Americans are patriots and will take an attack on their President lightly. We think we have only denigrated Mr. Trump in the last few days, but we have actually taken on America. In 2016, we thought Trump alone was the problem, because Americans don’t know what they voted for – that’s why our hostility towards President Trump was taken with a certain amount of understanding in America. But after the landslide victory on November 5, 2024, our hostility towards President-elect Trump is perceived as an affront to the US Senate, the House of Commons and the American people. I have a feeling our politicians know the East and West Coasts and think they know America.

America will continue to play the game, because in the huge squeeze Europe is in, it is worthwhile for Washington to maintain NATO and the partnership.

What exactly made you predict Trump’s big win?

We monitor trends over many years and always do our own data analysis so we don’t have to rely on the media and polls in an election year. We are seeing a steady increase in support for traditional American values and less involvement in wars abroad – as envisioned by the Founding Fathers. Trump’s “America First” spoke to these undercurrents. These people traveled and waited 8 to 15 hours just to see Trump, which made them more likely to vote as well. Harris had a brilliant August-September, but Democrats made big mistakes by sending thousands of immigrants to battleground states, filing lawsuits against Trump (making him a hero), and by shunning Harris’ impromptu interviews. Democrats tried to iron out their mistakes with even more celebrities and expensive advertising, overlooking the growing support even among Latinos due to their conservative family values – in fact, 55 percent of Latino men voted for Trump. Finally, Democrats told people how well the economy was doing, which was true for GDP and businesses, but not for middle class Americans. They are struggling to make ends meet due to the sharp rise in the cost of living. People wanted to go back to Trump’s America. Unlike 2016, this election was about finding out which “coalition” would come together and actually go to the polls. Those who took 9 hours to drive to and from a Trump rally were much more motivated on Nov. 5 than the many women who were always bussed to a Harris rally with a free celebrity show. Many of those women actually didn’t show up to vote. What part of the final Trump coalition did I miss? Those who rejected both candidates would vote for Trump in large numbers.

Since in America the states elect the president, the parties are working purposefully towards that – not towards maximizing votes at the national level. We had expected the Republicans to win the White House, the Senate and the House of Representatives (red or clean sweep), but I was surprised that Trump would also win four million more votes than Harris at national level. And you have to remember that Republicans haven’t won the popular vote for a long time. This was a massive landslide. In 2016, the movement was big enough to tear down the Democrats’ Blue Wall in the Rust Belt. This year, it practically tore it all away. Washington is still in tremendous shock.

Every election is different. In 2016, the movement was still young and had some overlap with the Tea Party movement, which was on the wane. In 2015-2016, many Americans joined the movement because they sympathized with Trump, who spoke out against Washington and broke with political correctness. What really helped Trump was the massive pressure exerted by the media to get people not to vote for him. That backfired. In 2016, the growing movement was so consistently underestimated – poll numbers were almost systematically just below our estimates, giving us unusually early confidence. Trump would deliver a shock on election day. 2016 was more of a numerical modeling exercise.

To what extent did Robert F. Kennedy, Jr., Elon Musk and JD Vance help?

This is difficult to quantify, but I am convinced that their support was decisive. Tulsi Gabbard and Robert F. Kennedy leaving the Democratic Party to join the Trump movement on the grounds that the Democrats were now the party of big money and censorship was the first piece of bad news for Biden-Harris. When Elon Musk threw his full weight around and then risked his business empire and fortune, independents and young people began to join the Trump movement. What Musk & Co were saying about Trump simply didn’t match what the press had been telling them. Musk and Vivek made it “cool” for young people to be conservative. But Trump’s biggest coup was picking JD Vance as his running mate. JD Vance embodies the American dream like no other in recent US presidential history – Vance was born into a poor and broken family in one of the most hopeless regions of America, served in the Marines in Iraq, studied hard, found his future wife at a prestigious law school (where he was the poor one), faced rejection from upper class lawyers, and finally made it. Ironically, every time Vice President Harris later boasted that she grew up middle class in order to appear more approachable and tangible to financially strapped or suffering Americans, she only emphasized Vance’s tale of woe.

Yes, I also think it comes down to the companions in the home stretch – this is where I think the Democrats badly let down Ms. Harris, who had to fight almost entirely on her own. They only corrected this late in the race. Even CNN dropped her several times. Many Democrats couldn’t hide their amazement until early fall – to them Harris was the nominee based on her identity, not her record. Her only truly fully committed team member, Walz, quickly became a liability for Harris due to his grandstanding. On the other hand, he was their choice. Trump had companions who were fully committed to Trump’s cause. First and foremost Elon Musk.

How does it affect the Swiss financial industry?

The Swiss financial industry is highly dependent on the political, economic and security stability of our country, which in turn enables us to maintain our neutrality. Unfortunately, these supporting pillars could collapse if the European economy continues to decline and the European Union or NATO are drawn into a war with Russia, Iran, North Korea or China.

Switzerland is in the middle of Europe and Europe is in big trouble because the EU has made many mistakes over the last 25 years. The European Union has maneuvered itself into a massive geopolitical, macroeconomic and security policy trap. Our leaders lacked strategic foresight – they did not realize that there would be 120 conflicts in the northern hemisphere by 2024. Our universities, banks and think tanks all assumed that free trade would increase peace – so we can reduce our armies. So much for our analytical skills in aggregate global dimensions, where economics and geopolitics overlap. My warnings over all these years were also gladly heard, but only taken seriously by a few.

The deterioration of transatlantic relations between the United States and Europe only exacerbates our predicament, as Europe is already on a collision course with Russia and China. Europe does not seem to realize geopolitically that it is not an equal partner in an alliance in the event of a possible war with its disarmed forces. The Switzerland has made the tragic strategic mistake of binding itself to a defenceless, over-regulated economic bloc (EU) through the bilateral agreements. Great Britain or the USA would have been much better partners – they can defend themselves and extend their powerful nuclear deterrent as a protective shield over Switzerland. We have completely lacked foresight here and now the wealthy rightly prefer to move their assets to America thanks to its military power or to other countries that are further away from conflicts. The strong ties to the financial system of a defenseless and geopolitically exposed economic bloc are now the Achilles’ heel of our Swiss financial industry. The EU was only a great economic model as long as it was guaranteed peace and cheap energy.

However, there is also an effect that many people underestimate: Whenever an Anglo-Saxon country rejects our European values, the Swiss are more willing to give in to the EU in the interests of European unity. We have already seen this several times. Swiss politicians, who for two years courageously resisted pressure from the EU and said: “It’s ridiculous to impose EU courts on us”, are now saying: “Let’s move closer to the EU”.

Geopolitical diversification is required. When Bern signed the bilateral agreements, we already knew that the EU was defenseless. From 2013 onwards, Swiss financial companies should have started to diversify geographically and geopolitically – among other things, we should have built bridges to other safe havens around the globe that pose less or complementary geopolitical risks than Switzerland. Unfortunately, Swiss companies have taken security in Europe for granted. This is where Swiss boards of directors in particular have failed, as their main task is to think longer-term and strategically or to foresee important changes and dangers. They merely took what the narrow consensus dictated.

As I have been warning since 2016, I think the Swiss financial industry is in denial about the risks and threats it faces. The time to take preventative measures is running out. Few investors and financial firms have strategically diversified into the US and dynamic young economies with healthy public finances along the southern hemisphere. The emerging economies of Latin America and Southeast Asia would have been ideal targets, as they could play a supporting role in and even benefit from the biggest conflicts and upcoming wars.

Trump was able to learn a lot during his first presidency from 2016. Can we now expect a rapid implementation of his policies with reshuffles at the FBI, prosecutors, a reorganization of the government apparatus, etc.?

Yes, this time Trump has surrounded himself with a team of capable people determined to avoid the mistakes of his first administration. In 2016, many institutions in Washington, judges and Trump’s own staff thwarted or sabotaged the president’s orders – if necessary through deliberate indiscretions. The choice of his chief of staff already shows how much Trump has learned. Susie Wiles was probably the first political strategist who believed in Trump and campaigned to make him president. Wiles doesn’t trust anyone, especially not someone who flatters Trump with compliments for a job.

There are some Trump allies who are demanding retribution for “persecution” suffered, that the president should also remove all politicized opponents from key agencies. But that would be too many officials. Our independent analysis suggests that Trump is seeking a more competitive and conciliatory view in this regard. However, his new chief operating officer wants to adapt this to current developments.

Entire Washington elites, even in the defense establishment, have already announced their opposition to Trump. In his first term of office, he did not prosecute his opponents and put them in prison by the dozen – which his supporters later denounced as a mistake, pointing to the many tactically clever criminal law measures (“prosecution”) during the Biden-Harris term of office. Trump, however, is used to toughness – the real estate business in New York is like that. After all that has come to light in recent years, I think Trump himself wants to limit this to those officials who knowingly deceived the American people and abused their power to weaken or censor political opposition. There is fear, however, because liberal-progressive judges have been able to keep Trump’s followers in prison for a long time for secondary offenses such as accounting or tax discrepancies, or force them to cooperate in criminal proceedings. Many Democrats fear a similar fate now that the iron-fisted Ms. Wiles will take over the operational management of the Trump administration.

Before the attempted assassination, Trump might have focused on retaliation, but I sense that coming so close to death has had a profound effect on the president-elect, who now wants to “use the extra time God has given him wisely,” as some of his confidants have indicated. The next President Trump will likely only go as far as it takes to keep the agencies running – as long as the job gets done and the orders are carried out, he doesn’t care about Democrats, having been one himself. Trump likes challenges and lives for them. But this still depends on the level of resistance that will emerge. Ms. Wiles, RFK, Musk and Vance disagree. Think of how Mr. Musk laid off 80 percent of the staff at Twitter – at the time the experts said the whole thing would collapse. Musk was right.

Are the announced drastic tariffs on products from China and the EU and a renewed transatlantic trade war to be expected?

Yes, President-elect Trump is likely to impose tariffs on a large scale. But in three phases: Threat, negotiation, implementation. All three phases form a loop that can be restarted. The Trump team has been working on a new economic model that has already been used once in the United States. It is a model based on tariffs on imported products to exempt the American people from paying income tax.

Most economists are against tariffs for good reasons, but these theories often assume peaceful relations – the fact is that we have entered a period of hostilities. The Trump team’s modern use of tariffs is a sophisticated multipurpose tool and geopolitical weapon: It helps realize several promises under the “America First” platform: (a) helping American families keep more of their money, (b) reducing the trade deficit, (c) pushing back foreign powers – it does help shield America as envisioned by the Founding Fathers, (d) pursuing an assertive combination of foreign and trade policy, (e) finally, this plays to his strength as a tough negotiator and businessman, forcing key departments to work in lockstep with his chief of staff.

The Trump team has opted for this instrument because it assumes that America has entered a phase of tough geopolitical and economic competition with China, Russia, Europe and the BRICS states.

The tariffs are used flexibly to offer countries incentives to cooperate with America. The Trump team wants to persuade as many developing and emerging countries as possible to work more closely with the USA and not ally themselves too closely with China via the BRICS bloc.

I expect the tariffs to end up being lower than Trump has announced, but I also expect President Trump to be very tough and firm with tariffs if any country dares to challenge the US or proves to be a beneficiary of the US.

During the election campaign, Trump repeatedly said that there would be no conflicts during his term of office. What will happen in Ukraine and the Middle East?

No one can guarantee what other nations will or will not do, but I can clearly see the fear of a President Trump in many non-Western capitals. Even in the West. That will curb or even stop hostilities. It’s not what many in Europe want to hear, but the quickest way to contain the 120 conflicts raging in the Northern Hemisphere alone is to put Trump in the White House. However, that does not mean that people will get justice.

At this point, this is our assessment of what Trump intends to do: In both war zones, a peace agreement it will come within weeks, if not days, of a reduction or cessation of hostilities. There will be what I call tactical peace agreements to cease hostilities rather than permanent peace agreements. The latter assumes that one side has completely defeated its enemy or that each side is satisfied or has received justice. However, the Trump team does not believe that complete destruction of the enemy is meaningful, nor is absolute justice possible, as the views and perceptions of all sides are completely incompatible.

Trump was against the expansion of the EU and NATO into the former buffer zone, but on the other hand he recognizes that the US and Russia are already in a proxy war. A dangerous conflict, because during his time in the Oval Office he has learned that several Eastern European countries have a lot to lose if this war ends. If this is not resolved soon, Russia and America could be at war with each other. With Russia a nuclear power, Ukraine in retreat and possibly collapsing this winter, it will be difficult to ask Moscow to give up ground gains. De facto, Russia could keep the eastern territories (especially Crimea), which used to be more or less inhabited by Russian-speaking peoples, in exchange for security guarantees for Ukraine. The EU will be de facto humiliated by this agreement – similar to the Yugoslavia conflict – and it will also look like it promised Kiev things it could not keep. However, the cessation of hostilities could pose greater problems and risks for Europe than the end of the Yugoslav conflict.

In the Middle East, Trump personally believes that Israel faces a daunting task, as the Arab side will ultimately not be satisfied with either land or peace. Trump has gained the impression during his first term that the Arabs really want the end of a Jewish state. That is why he has been counting on the Jewish state to trade more with Arab states so that the whole region benefits from Israel’s economy. Hamas cleverly sabotaged this with the cruel “October 7” attack. Against this backdrop, Trump believes that Israel must end the offensive sooner than Israel would like, as civilian casualties are rising and security threats elsewhere are increasing. Trump wants to fully restore Lebanon’s territorial integrity. Perhaps Paris could play a role here. In Gaza and what the Israelis call ancient Judea and Samaria and the UN calls the West Bank, Trump wants Arab nations to help secure a functioning Palestinian administration. But no Arab country is interested in getting involved so far – while they are happy to support the Palestinian cause and give money, they are afraid that the Palestinians will destabilize their nations, as in Jordan. Trump does not want Israel to destroy Iran. Instead, the US will restrict Iran economically. Netanyahu is upset about this, but he may have to accept Trump’s deal and end his latest operations before January 20. Trump doesn’t like the ayatollahs, but he likes the idea of Washington removing another foreign regime even less, because what comes next is usually much worse. But there is resistance to this in the Senate and the military complex.

In both war zones, a peace agreement with a tactical transactional character will make many people unhappy. As usual, people will not appreciate peace until the economy and life flourish again. Trump hopes that the cessation of hostilities will pave the way for trade and that economic exchanges will naturally pave the way for a more permanent agreement. The flip side of Trump’s pragmatism is that hostilities in the Middle East will continue and what all parties involved have caused in Ukraine will not be resolved or healed for a long time. There is a growing realization that no peace treaty is likely to satisfy Moscow’s desire for a settlement with the West. This poses a significant residual risk, especially for an EU that is barely able to defend itself until around 2029. This is one of the reasons why the USA does not want any EU countries in its new powerful global military alliance (AUCUS).

Although Trump has not spoken of wanting to leave Nato, he could still do so. Will he make it dependent on the payment of the defaulting states that have not yet paid the two percent of GDP for defense?

The United States of America is building a new global military alliance, a powerful alliance called AUKUS, which consists of nuclear-armed nations with strong militaries. It has the US-UK axis and Anglo-Saxon forces at its core. Australia has joined because it has pledged to build a nuclear submarine fleet to rival that of the UK. Only countries with well-equipped armies are allowed to join – the main criterion is “no free riders like in NATO”, i.e. countries that could involve the alliance in a war but cannot really defend the others. The fact that only the strongest European military power (the United Kingdom) was invited by the USA to join this new global military alliance as a main partner speaks volumes.

In fact, NATO is being partially replaced and downgraded as a priority. So Trump does not have to leave NATO. Keeping a dysfunctional NATO with many free riders that still need to rearm massively serves certain US interests, binds Russia and projects power. NATO exists, but it is weaker than it was 10 or 20 years ago. There has been more spending on the military in the last two years, but the divisions and mistrust between members have reached unprecedented levels. So if Europe causes too much trouble, Trump can leave NATO at any time.

In the eyes of important military circles in Washington, it is sometimes pointless to talk to the EU about defense. Even after the invasion of Ukraine, Europeans believe that they are safe if they spend 2 percent of GDP on military spending. The Americans have struggled with this European mentality for so many years – long before the war in Ukraine, the US, UK and Australia sat down to discuss their defense plans for the wars of this century. An alliance was formed back then that is not dependent on the EU. AUCUS exudes a powerful deterrent and at the same time has a stabilizing effect because it is a reasonably symmetrical alliance of Anglo-Saxon nations capable of defending themselves. In fact, it is the military alliance that non-Western nations fear or respect the most.

Illustration needed: Contrary to the bureaucratic view of defense in the EU a, the UK began investing in a massive and costly upgrade of its nuclear submarine deterrent about ten years ago. CASD (Continuous At Sea Deterrent) involves at least one British nuclear submarine operating around the clock at a secret location underwater to attack or retaliate against any enemy. The UK has one of the most formidable nuclear deterrents. Only Russia and the US also have such a credible submarine deterrent. So no one can come to the aid of the US as effectively as the UK in the event of a surprise attack. CASD is feared, so it serves its purpose. Most importantly, given their numerous war engagements, no country doubts that the British will go to war or use CASD if they deem it necessary. We are talking about a submarine budget that supports 42,000 jobs and 2,500 businesses. Not to mention the defense technology. It gives the UK a seat at the table to help shape the international order. I never understood why the EU didn’t realize how much it would need the British military in the future. Brussels said in 2020 that the UK needed the EU, not the other way around – overlooking defense, of course. NATO consists of the US, the UK and a fairly defenseless EU bloc. Some EU forces are operational, but they are small or conventional. Unfortunately, even if they were increased tenfold, hardly anyone takes Europe’s political readiness for war seriously.

You invest as much as necessary in defense – especially in tense times. Everything else depends on whether other powers are deterred effectively enough to keep the peace. Currently, the required spending level is not 2 percent, but 3 percent. America is likely to demand this and more.

The stock market is talking about a “red sweep”, the Republican sweep. What impact will the election have on the stock markets, small caps and on the dollar and Bitcoin of “crypto president” Trump?

It will have a positive impact – the US economy is likely to experience a major upturn. However, this will be partly at the expense of other countries. As certain countermeasures are to be feared from the EU, China and the BRICS countries, small caps are likely to be somewhat safer. The USD should benefit from the assertive foreign and economic policy and the expected economic upturn. Higher deficits at the beginning will keep interest rates high and also support the USD. As Trump supports Bitcoin, the crypto world will receive a strong boost. Gold and silver are likely to correct initially, but trade conflicts will keep inflation alive and deficits high, so gold should come back in the medium term. Too many strategists are negative on the USD but underestimate the growing role of geopolitical/military power in tense times.

What about oil production? In his victory speech, Trump promised to produce more oil than Saudi Arabia and Russia.

Yes, that is quite possible. Trump is likely to boost oil and gas production to boost economically depressed regions that he promised to support during the election campaign. This will also help flood America with cheap energy to offset the impact of tariffs on consumer prices. The Trump team wants to attract American, European and Asian companies back to the US with rock-bottom energy prices and a growing economy. Oil prices are therefore likely to remain low until it is clear to what extent the USA can increase its oil production. This also has a geopolitical-military perspective: the Trump team knows that the world has entered a dangerous phase and therefore wants to make America as energy self-sufficient as possible, because energy is crucial in the event of tensions, embargoes or war.

Christian R. Takushi MA UZH is a macroeconomist and geopolitical strategist with 34 years of experience as a researcher, fund manager and strategist in the investment industry. He has predicted major political and economic events (e.g. CHF breakout in 2011, CHF-EUR peg break in 2014, Brexit, Trump (2016 & 2024), blockade of trade routes, return of wars). Thanks to his expertise on Asia, the Middle East and Latin America, he advises governments, parliamentary committees, central banks, companies, pension funds and asset managers as an independent geopolitical economist.

Master in Macroeconomics – Member of the CFA Institute & Swiss Financial Analysts Association.

Read also: Navigating global turbulence: Insights from Christian Takushi’s webinar