Assessing the Geopolitical and Electoral Impact on European Markets: Trump's 2024 Re-Election Prospects and Policy Implications

The 2024 U.S. presidential election has emerged as a pivotal event for global investors, particularly in Europe, where policy shifts under a potential Donald Trump re-election could reshape trade dynamics, energy markets, and asset allocation strategies. Trump's campaign has outlined a starkly protectionist agenda, emphasizing reciprocity in trade, energy independence, and a reorientation of U.S. foreign policy. These proposals, if enacted, could elevate geopolitical risk and force European investors to recalibrate their portfolios to mitigate exposure to U.S.-driven disruptions.

Trade Policy and Geopolitical Risk

At the core of Trump's 2024 platform is the Trump Reciprocal Trade Act, which mandates that countries either eliminate tariffs on U.S. goods or face steep financial penaltiesPresident Donald J. Trump to Host a Town Hall in Fayetteville, NC^[2]. This approach, framed as a tool to enforce “fair trade,” risks triggering retaliatory measures from European nations, which have long been U.S. trade partners. For instance, German manufacturing—reliant on U.S. exports of machinery and automotive components—could face retaliatory tariffs if the EU resists U.S. demands. Such a scenario would likely disrupt supply chains and increase costs for European exporters, prompting a shift toward regional trade agreements or domestic production.

Investors may respond by favoring assets less exposed to transatlantic trade volatility, such as emerging market equities or commodities. Defensive sectors like utilities and healthcare could also gain traction as hedges against geopolitical uncertainty.

Pharmaceuticals and Supply Chain Reconfiguration

Trump's pledge to “bring essential medicines back to the U.S.” through phased tariffs and import restrictionsPresident Donald J. Trump to Host a Town Hall in Fayetteville, NC^[2] poses a direct threat to European pharmaceutical giants. Companies like Roche and Sanofi, which currently dominate global drug production, could see reduced export volumes and margin pressures as U.S. demand shifts toward domestic manufacturers. This policy mirrors Trump's 2019 tariffs on Chinese pharmaceutical imports, which briefly caused shortages and price spikes in the U.S. marketPresident Donald J. Trump to Host a Town Hall in Fayetteville, NC^[2].

European investors may need to reassess their exposure to the sector, favoring firms with diversified production bases or those pivoting to biotech innovation. Conversely, U.S. pharmaceutical producers with lower-cost manufacturing capabilities could attract inflows, creating a transatlantic divergence in sector performance.

Energy Independence and Market Reallocation

Trump's emphasis on making the U.S. the “country with the lowest energy costs globally”President Donald J. Trump to Host a Town Hall in Fayetteville, NC^[2] could accelerate the decline of European energy exports. A surge in U.S. shale production, coupled with reduced reliance on European LNG, might depress global energy prices and weaken the profitability of European energy firms. This aligns with Trump's 2017 energy agenda, which prioritized fossil fuels over renewables—a policy that historically benefited U.S. oil majors while disadvantaging European green energy initiativesPresident Donald J. Trump to Host a Town Hall in Fayetteville, NC^[2].

For European investors, this signals a potential underperformance in traditional energy stocks and a need to rebalance toward renewable energy technologies or energy-efficient manufacturing. However, the EU's Green Deal and carbon pricing mechanisms may provide a counterweight, offering opportunities in carbon credits and sustainable infrastructure.

Strategic Asset Allocation Amid Policy Uncertainty

The broader implications of Trump's policies—ranging from trade wars to a redefined NATO role—could elevate risk premiums in European markets. A 2023 Bloomberg report noted that Trump-era policies historically increased volatility in European equities by 15–20% during election cyclesAgenda47 | Donald J. Trump^[1]. Investors may prioritize liquidity, shortening bond durations and increasing allocations to gold or defensive currencies like the Swiss franc.

Moreover, Trump's pledge to “dismantle the Deep State”President Donald J. Trump to Host a Town Hall in Fayetteville, NC^[2]—interpreted as reducing federal bureaucracy—could create regulatory unpredictability, further complicating foreign direct investment (FDI) into the U.S. European firms with significant U.S. operations may hedge against this by diversifying their North American supply chains or shifting capital to Asia-Pacific markets.

Conclusion

As the 2024 election approaches, European investors must navigate a landscape shaped by U.S. policy shifts that prioritize unilateralism over multilateralism. While Trump's agenda could spur domestic U.S. growth, it risks creating friction with European markets, particularly in trade and energy. Strategic asset allocation will hinge on hedging against geopolitical volatility, diversifying supply chains, and capitalizing on sector-specific opportunities in renewable energy and technology.