Commodity markets may experience greater fragmentation and supply disruptions if former U.S. president Donald Trump wins the November 5 election, according to HSBC economist Paul Bloxham. Speculation about Trump’s potential return to the presidency has intensified following U.S. President Joe Biden’s weak start in the first presidential debate, raising concerns about the implications of Trump’s trade policies and proposed tariffs on China. These developments add to the existing challenges in commodity markets, which are already grappling with high prices due to structural supply constraints and geopolitical tensions.
Bloxham, HSBC’s chief economist for Australia, New Zealand, and global commodities, highlighted the risks associated with a shift toward increased global trade protectionism. “A rise in global trade protectionism or a shift in the pathway of that trend is a global macroeconomic risk we are watching out for,” Bloxham stated. He noted that such changes could lead to greater fragmentation of commodity markets and create supply disruptions that would support higher commodity prices.
The current global commodity market is experiencing what Bloxham describes as a “super-squeeze,” driven by a combination of geopolitics, climate change, and the energy transition. This squeeze has already resulted in elevated commodity prices, and HSBC’s statistical model in May indicated a shift from a ‘weak bull’ to a ‘super bull’ phase in commodities. Bloxham expects commodity prices to remain “permanently higher” and unlikely to revert to their previous trends.
Large producers, particularly those involved in materials essential for the energy transition, such as copper, are expected to benefit from these market conditions. Bloxham also identified potential winners among Latin American economies, the U.S., Australia, and Indonesia, which are poised to take advantage of the sustained higher commodity prices.
The combination of geopolitical tensions, climate change, and the global energy transition continues to shape the commodity markets. Bloxham’s insights underscore the importance of monitoring these factors and their potential impact on global trade and commodity prices. As the world navigates these complex dynamics, the outlook for commodity markets remains closely tied to both political developments and broader macroeconomic trends.
READ MORE: