Higher share prices. A stronger dollar. A less rapid pace of interest rate cuts. The financial market reaction to Donald Trump’s return to the White House was swift and predictable.

The man who will become his country’s 47th president has made no secret of what he plans to do: cut taxes, impose heavy tariffs on imported goods, place curbs on migration, and slash red tape.

Most economists expect Trump’s economic measures – even if they are scaled back once he is in office – would be bad for growth, not only in the US but for the rest of the world, too. Having exploited the unhappiness of many US voters about the increases in the cost of living during Joe Biden’s presidency, Trump’s approach to running the economy would also lead to higher prices for consumers.

But putting up barriers to trade and reducing business taxes would boost the profits of corporate America, which explains why shares on Wall Street are expected to rally when trading opens later.

Higher inflation is likely to result in the US central bank – the Federal Reserve – being warier about cutting interest rates. Financial markets still expect a 0.25 percentage point cut in US rates on Thursday but thereafter the outlook appears less clearcut.

The anticipation of US borrowing costs being higher for longer had an instant impact on the currency markets, where the US dollar rose strongly, especially against the euro.

The explanation for that is obvious. The 20-nation eurozone has been performing much less well than the US since the end of the Covid-19 pandemic and is vulnerable to the tariffs Trump has pledged to introduce: a 60% levy on Chinese goods and a 10% levy on goods from all other countries.

After weeks in which pundits had said the race was too close to call, the markets were relieved that Trump’s victory appeared clearcut. But as Lindsay James, an investment strategist at Quilter Investors, noted, the economic impact of the new Trump presidency was likely to be volatile.

“While he, and others that surround him such as Elon Musk, want to cut the size of the state, public spending is likely to remain very high and taxes kept low. Many of his measures will be inflationary and likely to lead to a rise in bond yields, putting pressure on the Federal Reserve in its quest to bring interest rates down.”