As the world watches on and prepares for Donald Trump’s second inauguration, markets are bracing for potential turbulence.

Lama Abousalem

2025

In the leadup, investors are also interested in various policy shifts that Trump, as well as his nominated senate, have been expressing. Trump’s territorial rhetoric, such as his comments on the Panama Canal, Canada, and Greenland, indicates a potential shift in U.S. foreign policy toward more aggressive positioning. These statements could mean a push for greater control over global trade routes and influence in strategically important regions. Trump’s comments have already elicited responses from officials like Canada’s Green Party leader, Elizabeth May, who has recently gone viral in her response to Trump’s remarks. This shift in geopolitical relations is sure to create uncertainty in markets concentrated within the Americas and the Arctic. Also, Trump’s "drill, baby, drill" mentality puts emphasis on expanding domestic fossil fuel production, especially through increased drilling. This has created great concern in areas already affected by the oil industry. Pushing for more production will intensify competition in energy markets, shift U.S. reliance away from renewables, and disrupt both global efforts toward sustainable energy as well as the Biden Administration’s investments made towards sustainable development. As he continues advocating for fossil fuel dominance, energy investors are on edge, preparing for the effects of this policy on both energy prices and climate strategies.

One of the most contentious topics leading up to the inauguration is Trump’s proposed 25% tariff on imports from Canada and Mexico, both of which make up almost a third of the country’s trade activities. If enacted, this policy will have profound effects on all sides. Specifically for the US-Canada trade relationship, almost $3.6 billion crosses the border daily. According to Ivey Business School, a tariff of 10% is significant enough to cause a 2.4% decrease in the Canadian GDP and lead to the loss of half a million jobs. The 25% case would be catastrophic, with job loss affecting 1.5 million Canadians, GDP reductions almost triple the 2.4%, as well as "severe supply chain disruption, and permanent structural changes." Even for the average American consumer, prices would increase, specifically in areas such as housing and automotive costs, which are heavily reliant on Canadian lumber and vehicle parts. Foreign Minister, Melanie Joly, has already hinted at a “Trump tariff tax,”  warning American consumers about the possibility of a trade war that would destabilize markets on both sides of the border.

Going back to stock market trends during previous administrations, we see revealed both successes and limitations of presidential influence. For instance, the cumulative market growth during Barack Obama’s first term was over 80%– the restabilization efforts post-2008 being a strong driving force. Donald Trump’s first term brought a 70% rise, fueled by corporate tax cuts and deregulation, though toned down by trade tensions. Under Joe Biden, the S&P 500 gained 58%, reflecting the resilience in sectors like technology and healthcare in spite of the challenges brought on by COVID-19 and the resulting lockdowns. These figures highlight how presidential policies set the stage for market dynamics, but it is rather global events such as economic crises or public health emergencies that play an even more critical role in shaping trajectories.

Overall, this period of volatility underscores the complex interplay between policy shifts and the adaptive nature of global capital markets. As inauguration day looms closer, we can only await to see how many of the above shifts will come to life and what their ripple effects will mean for economies and markets worldwide.