Since Donald Trump returned to the White House, global markets have entered a landscape defined by unpredictability, recalibration and opportunism. What started as a confidence-fuelled surge in equities and the U.S. dollar has given way to increased volatility, reframed trade dynamics and a subtle but significant reordering of capital flows.
Global markets in a year of Trump 2.0, investors have adapted to a new normal where policy shocks and shifting trade incentives serve as the backdrop to market behaviour.
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At a global level, this moment demands two lenses: one, the traditional macroeconomic view of currencies, bonds, stock indices; and two, the behavioural-finance one, how markets now price “tariff risk”, hedge behaviour, and the so-called “TACO” trade. That dual perspective underpins the narrative ahead.
In the immediate aftermath of Trump’s election, the U.S. dollar rallied on expectations of aggressive fiscal stimulus, tax cuts and deregulation. Yet over the past twelve months, that rally has softened: the dollar is now down around 4 % from its post-election peak.
Analysts note that despite the dollar’s still-favoured safe-haven status in moments of global turbulence, longer-term concerns have emerged: rising deficits, elevated tariff-driven business costs and the erosion of global trust in multilateral trade frameworks. According to Piotr Matys, a currency analyst, the dollar remains “the cleanest dirty shirt” in investor panics, yet the phrase itself signals a weariness with relying on the greenback as an unquestioned refuge.
For emerging markets and non-U.S. investors, the implications are stark: currency mismatches, hedge cost increases and a steeper burden of external debt servicing if the dollar strengthens further. The interplay of tariffs, trade shocks and currency flows is now firmly a part of the global market calculus.
Contrary to what might be expected in a period of policy turbulence, global equities have posted robust gains. The MSCI World Index rebounded after a 10 % drop following the “Liberation Day” tariff announcements on 2 April 2025, and is now up more than 20 % since Election Day. In the United States, the S&P 500 has gained around 17 % in that same time frame, fuelled in large part by the artificial-intelligence boom and investor expectations of looser monetary policy.
Simultaneously, traditional safe-haven assets have soared: gold reached a record high of approximately US $4,381 an ounce in October, while bitcoin climbed to about US $125,836. This dual movement, risk assets advancing, safe-havens also rising may appear paradoxical, but reflects the nuanced duality of the market environment: risk-on for technological and growth plays, risk-off for defence, inflation hedging and structural uncertainty.
For global investors, especially in Africa or other emerging regions, the message is clear: constructing portfolios in 2025 means balancing growth exposure with hedges against policy shocks that may emanate not from the usual macro sources, but from tariff edicts, trade threats and cross-border supply-chain upheavals.
Long-term bond markets have responded to the Trump 2.0 era with cautious concern. In the U.S., the 30-year Treasury yield has edged upward to about 4.66 %, rising 14 basis points since last November. Japan’s 30-year government bond yield climbed to a record 3.286% on Wednesday, marking an increase of more than 100 basis points so far this year. Meanwhile, the yield on the 20-year note rose to 2.695%, its highest level since 1999, reflecting an 80-basis-point surge in 2025; France and Germany saw increases of 62 and 59 bps respectively.
These shifts point to heightened investor concern about long-term fiscal sustainability, particularly as the U.S. government embarks on a US $3.8-trillion tax-cut package over the next decade. The message for policymakers in Africa, and elsewhere in the Global South, is sobering: global bond-funding conditions remain vulnerable to major policy shifts in the U.S., and emerging-market yields may not decouple from the U.S. cost of capital for very long.
Tariffs, Trade Imbalances and the “TACO” Strategy
At the heart of the Trump 2.0 narrative lies the aggressive use of tariffs to address trade imbalances. Notably, the U.S. merchandise-trade deficit narrowed to US$60.2 billion in June 2025, a two-year low, and the U.S.–China deficit shrank by 70 % over five months, reaching its lowest level in more than 21 years.
This has been achieved, however, at the cost of heightened business uncertainty, supply-chain disruption and elevated input costs. The term “TACO” shorthand for “Trump Always Chickens Out” has become a market shorthand describing the pattern: aggressive tariff announcements followed by market jitters followed by delayed action or negotiation.
From a global perspective, the ripple effects are notable. Many middle and low-income countries that are part of global supply chains find themselves squeezed: higher U.S. tariffs magnify the cost of exporting, while uncertainty raises financing risk. For African economies that are plugged into global value chains whether through raw materials, manufacturing or logistics, this provides a potent reminder of the importance of resilience, diversification and regional value-addition.
Implications for Africa: The Continent in a New External Order
African economies, though distant from the epicentre of U.S. trade policy, cannot fully insulate themselves from its consequences. A rising U.S. dollar, shifting global demand and tariff-driven supply-chain realignments all carry implications for export receipts, foreign-direct-investment flows and debt-service burdens.
Consider the following: as Chinese export volumes adjust under U.S. pressure, other markets in Africa may seek to fill gaps, yet higher business costs, variable currency conditions and logistical bottlenecks can blunt the advantage. Furthermore, as safe-haven flows intensify during global trade shocks, capital may gravitate away from frontier markets, raising borrowing costs.
African policymakers thus face a dual challenge. On one axis, they must maintain growth momentum, investing in infrastructure, industrialisation and human capital. On the other hand, they must bolster external resilience: building currency buffers, diversifying export markets, deepening regional supply-chains and ensuring that fiscal frameworks remain credible in the face of global turbulence.
The events of this past year underscore the limitations of existing global trade frameworks and the necessity for strategic realignment. The World Trade Organisation’s under-capacity, the fragility of open supply chains and the power of unilateral tariff-threat rhetoric indicate that countries must think differently about international economic integration.
In this context, three global frameworks merit attention: the WTO Rulebook, which still provides the baseline legal framework though its enforcement ability is waning; currency and reserve-asset regimes, as the dollar’s dominance faces gradual diversification; and regional value-chains, where supply-chain resilience takes precedence over geographic concentration. Africa’s Continental Free Trade Area (AfCFTA) becomes increasingly relevant as regional economic integration offers a buffer against external shocks.
For African leadership, aligning with these frameworks means active engagement: building trade relationships (both north and south), pursuing structural reforms that enhance competitiveness, and investing in institutional capacity that navigates volatility rather than merely responding to it.
The Tactical Compass for 2026
As we progress into 2026, the landscape will continue to be shaped by three key tensions. First, the cost-inflation trade-off: when tariffs raise costs, can central banks respond without stifling growth? Second, the fiscal-sustainability question: large deficits and higher borrowing costs may limit policy flexibility. Third, the global-realignment dynamic: will supply chains and trade patterns shift permanently, or will we see retrenchment and protectionism ebb?
Investors have already begun to reconcile with the “TACO” trade paradigm, the idea that threats may be more potent than follow-through, and that markets must price in both shock and retreat. For African economies, this means reframing their external outlook not as passive recipients of global conditions but as active participants in a more uncertain but opportunity-packed world order.
In sum, the year of Trump 2.0 has not simply been about tariffs and markets. It has been about the re-architecting of the global risk matrix: where money flows, whom trade favours, and how countries externalise or internalise shock is increasingly contingent on policy surprises rather than policy continuity. For those willing to adapt, there is potential upside; for those anchored to old certainties, there lies risk.
