Last Monday, all eyes turned to Washington, D.C., for the inauguration of President Trump as he returned to the Oval Office. In this week’s blog, we analyze the most notable executive orders signed on Trump’s second first day, what to expect from his administration, and the implications for global capital markets.

Trump’s campaign was heavily focused on a few key issues, with tariffs and immigration standing out. He threatened China with imposing 60% tariffs on all goods imported into the US, and Mexico and Canada with 25% tariffs, while instituting a 10-20% tariff on all other imports. Regarding immigration, he was even more fierce, pledging to expel millions of illegal immigrants, strengthen border control, and stop the inflow of narcotics into the US, for which he blamed illegal, criminal immigrants and China as a supplier of fentanyl. These policies were widely questioned, as tariffs and increased expenses related to immigration enforcement were expected to place additional inflationary pressures on an already inflation-affected US economy.

However, Trump’s second first day as President was pretty productive and eventful, as he signed numerous executive orders addressing immigration, foreign policy, energy, cultural issues, government functions, and more. Let’s dive into the details of these directives.

Government Functions – “All About Efficiency”

The first order of business was to revoke “harmful” executive orders and actions of the previous administration. Among these initial rescissions, Trump ended “diversity, equity, and inclusion” (DEI) programs, stating that their “injection has corrupted US institutions by replacing hard work, merit and equality with divisive and dangerous preferential hierarchy”, aiming to reform the federal hiring process and restore merit-based government service.

Additionally, Trump’s plan to combat inflation and the public deficit through reduced public expenditure began with the establishment of the Department of Government Efficiency (DOGE). The department’s primary function will be modernizing federal technology and software to maximize efficiency and productivity. Trump also announced the creation of a new state agency (at least a new version of it) – the External Revenue Service – to collect tariff revenues.

Moreover, he ordered all department and agency heads to terminate remote work arrangements and require full-time, in-person attendance. Furthermore, a hiring freeze was implemented for federal employees until a plan to reduce the federal workforce is submitted, excluding military personnel and positions related to immigration, enforcement, national security, or public safety. Naturally, the White House faced significant backlash from unions and employees concerned about the potential loss of jobs they deemed unfairly labeled as “inefficient”.

Immigration – “Illegal Aliens”

Trump’s seriousness about addressing immigration was underscored by his declaration of a national emergency at the southern border, granting additional authority to the Department of Defense and mobilizing military to secure the border with Mexico. He revoked previous executive orders that had opened borders and suspended the US refugee admissions program. The “Remain in Mexico” policy was reinstated, along with plans to build a wall along the southern border.

One of the most controversial orders was the abolition of birthright citizenship for children born in the US to parents who are illegal immigrants. This order, based on the Fourteenth Amendment, is expected to face significant legal challenges, with critics arguing it violates the Constitution, which Trump considers misinterpreted.

Trump also designated narcocartels and similar organizations as foreign terrorist organizations. He accused China, Mexico and even Canada of contributing to the US narcotics crisis, specifically citing China’s alleged role in supplying fentanyl to Mexico, which is then smuggled into the US.

Foreign Policy – “America First”

Although President Trump has not yet signed official tariff orders, he has promised to impose 25% tariffs on all imports from Mexico and Canada by February, while threatening China and the EU with similar measures due to their “unfair and unbalanced trade”. This “America First Trade Policy” includes a specific focus on trade relations with China and materials used in batteries to protect domestic technology industry.

Trump also criticized the US foreign aid system, stating it often works against American interest. As a result, department and agency heads have been instructed to pause new foreign aid obligations until they are reviewed for efficiency and alignment with US foreign policy.

Moreover, Trump announced the US withdrawal from the World Health Organization (WHO), citing its mishandling of the COVID-19 pandemic, failure to adopt necessary reforms, and perceived bias toward certain member states, particularly China.

Energy – “Drill, Baby, Drill”

Transitioning from foreign policy to energy, Trump re-submitted a notification of US withdrawal from the Paris Agreement and revoked Biden-era Green New Deal orders. He lifted restrictions on fossil fuel production, ended subsidies for EVs and charging stations, and imposed stricter measures on imports of cars and battery materials from China.

Another national emergency was declared, this one regarding energy, with Trump citing inadequate domestic production and capacity to meet rising demand driven by advancements in AI. To address this, he signed an order to unlock Alaska’s natural resource potential, promising to increase domestic energy production, reduce prices, create jobs, and counter foreign powers’ use of energy as a geopolitical weapon. He also threatened to significantly increase oil production and LNG distribution to Europe to undermine Russia’s economy if Putin does not cooperate with US interests regarding stopping the war in Ukraine. Moreover, he made a request to Saudi Arabia and OPEC to also increase production and bring down the prices.

Additionally, Trump temporarily halted offshore wind leasing and ordered a review of federal permitting practices for wind projects, claiming wind energy is inefficient.

Other Executive Orders

Just hours after the TikTok ban, Trump suspended the decision granting a 75-day reprieve on the condition that its Chinese owners enter into a joint venture with American investors to ensure compliance with US laws. Among the potential buyers of TikTok’s US operations are the omnipresent Elon Musk and Trump’s new business partner, Oracle’s Larry Ellison.

Building on this development, Trump also highlighted the “Stargate” project – a $500bn private-sector investment aimed at developing AI infrastructure and data centers. The initiative involves major companies like Oracle, OpenAI, and SoftBank, and is projected to create over 100,000 jobs, further solidifying the United States’ position as a global AI superpower.

President Trump also rescinded a Biden-era executive order on generative AI safety guidelines, which required large language models to share safety test results with the government.

Additionally, Trump restored freedom of speech protections by ending federal censorship programs. Moreover, he took a strong stance against gender ideology, eliminating rights for transgender individuals in the military and public schools, forbidding trans athletes from competing in women’s sports, and revoking racial equity and gender identity protections.

Also, Trump pardoned many convicted January 6^th Capitol rioters, which was met with a lot of criticism, renamed Gulf of Mexico to Gulf of America, renamed Denali back to Mount McKinley, restored capital punishment, promised to declassify documents related to the Kennedy assassination and many, many more.

What Does It All Mean for the Capital Markets?

The first year of Trump’s second term is expected to bring heightened market volatility due to potential impacts of trade wars, persistent inflationary pressures and unresolved geopolitical tensions, casting a shadow of uncertainty over global capital markets.

Furthermore, diverging monetary policies between FED and ECB may further impact markets, with Europe’s sluggish growth likely to force continued interest rate cuts, while US rates are expected to remain stable (only one FED rate cut anticipated in 2025). Meanwhile, US government support for energy and technology sectors could create additional headwinds for European industries, especially in the automotive and green sectors.

Moreover, European cohesion might be tested as bilateral agreements between the US and certain EU member states – such as Italy, Poland, and Hungary, whose leaders openly support Trump and his new administration – strain relations with Germany, France and the EU as a whole. Conversely, strong US sanctions on Chinese companies could hurt them in the short term but may open opportunities for closer ties between China and Europe, such as the speculated purchase of a Volkswagen factory by Chinese investors.

To sum up, continued inflationary pressures driven by tariffs could lead to further declines in bond prices. On the other hand, US equity is expected to benefit from the government’s focus on strengthening domestic companies through lower taxes, as well as the US dollar who could potentially break below the EUR/USD parity, further bolstering US financial markets. Finally, cryptocurrencies may also see significant gains under Trump’s presidency, fueled by the announcement of strategic federal Bitcoin reserves, creating a crypto task group and his repeated commitment to becoming the first “crypto president”.

Nevertheless, increased volatility and uncertainty could easily steer capital markets in the wrong direction, making the supposed “Golden Age of America” a turbulent and unpredictable four years.