His victory Donald Trump in the American elections caused euphoria in the stock markets, mainly in Wall Street where the S&P 500 made new all-time records and in the cryptocurrency market with the expectation that the president-elect will implement his pre-election announcements of development measures to support the crypto.

On the other hand, bond markets, mainly US Treasuries, moved lower and their yields rose, with those of 10-year Treasuries approaching 4.5% on Wednesday, as the risk of rising US inflation from the Trump’s policies. However, over the next few days bond prices moved higher with the yield on the 10-year note falling to 4.31%. The price of gold also fell due to higher bond yields.

This course of the markets had begun to appear in the last 10 days before the election, based on the so-called “Trump bet” (Trump Trade) and continued after the election result that confirmed the forecasting companies, which showed the winner of the president-elect against with the polls discounting a completely inconclusive battle between the two candidates.

However, the impact of Trump’s campaign announcements on the world economy, even the American one, will be more complicated than the “reading” of stock investors, who are used to seeing the “glass half full”, downplaying negative aspects of his announcements.

In fact, analysts and policy makers openly express fears of negative consequences of Trump Tradeespecially for open economies with high exports, such as Germany par excellence in Europe. For Greece, these consequences would be smaller due to the relatively small volume of manufactured exports to the US, but a recession in Germany would put pressure on the Greek economy as well as on other European economies.

At the heart of the concerns is the president-elect’s proposal to impose horizontal tariffs of 60% on Chinese goods and 10%-20% on imports from other countries. If one takes these announcements at face value, growth will be negatively affected because they will inevitably cause a trade war with other countries. Trade wars lead to growth losses for all countries, the IMF had warned a few weeks before the US elections, based on the experience of old times of protectionism.

On the same wavelength was the statement of the central banker of France after the elections, Francois Villerois de Gallo. “The US election should be a wake-up call for Europe,” he told a business conference in France, adding that while we had to wait to see Trump’s concrete policy moves, there was a risk his plans would lead to a higher deficit. and more inflation in the US.

The Bloomberg Economics has estimated that Trump’s tariffs would increase inflation in America by 2.5% and reduce its GDP by 0.5% in the two years after they were imposed.

The risk to US inflation is even greater because Trump has also announced big tax cuts, for businesses and households, that would inflate the country’s already very large deficit and increase its public debt by 7.75 trillion. dollars over the next decade, according to the bipartisan Budget Committee in the US Congress.

Budget measures, however, must be approved by Congress and the Morgan Stanley notes in her analysis that ultimately the changes in taxation are likely to be less drastic than those announced by Trump, among which is the reduction of the corporate tax rate to 15% from 21%.

This is also a crucial point, what will be the policy that will be implemented in the end, since even with the control of the Congress by the Republicans it is estimated that there will be pressures for a more prudent fiscal policy.

The combination of higher inflation and a budget deficit would keep U.S. Treasury yields and short-term interest rates high Fedwhich as mentioned has been discounted by bond purchases.

For Europe the risks stem from tariffs, with the German economic institute IW to estimate that they would lead to a reduction of the German GDP by 1.5% in the next two to three years and this in a period of serious problems and stagnation or recession of its economy. OR European Central Bank could, analysts say, accelerate rate cuts to support the economy, but that won’t be easy if inflation also accelerates in Europe because of tariffs or the dollar appreciates because of higher U.S. interest rates.

But first, it remains to be seen what the US president-elect will do in practice.