By Anisha Sircar and Divya Chowdhury
(Reuters) – Commodity markets will face greater fragmentation and supply disruptions if former U.S. President Donald Trump wins the Nov. 5 election to return for a second term, an HSBC economist said on Friday .
A weak start by US President Joe Biden in the first US presidential debate on Thursday led to increased speculation about the potential return of a Trump presidency, including the implications of his trade policies and proposed tariffs on China.
Commodity markets, already facing high prices driven by structural supply constraints, also face uncertainty arising from geopolitical tensions, said Paul Bloxham, HSBC’s chief economist for Australia, New Zealand and global commodities.
“A rise in global trade protectionism or a change in the direction of that trend is a global macroeconomic risk that we are keeping an eye on,” Bloxham told the Reuters Global Markets Forum (GMF).
“This would increase the risk of further fragmentation of raw materials markets and create a supply disruption that would support raw material prices.”
Geopolitics, climate change and the energy transition are combining to drive a “super-compression” of the global raw materials market, said Bloxham, who previously worked with the economic analysis department at the Reserve Bank of Australia.
HSBC’s statistical model in May indicated a shift to a “super bull” phase from a “weak bull” phase in raw materials, despite already high prices. According to HSBC, raw material prices are unlikely to return to their previous trend and are expected to remain “permanently higher”.
Bloxham hopes that large producers, especially those involved in the energy transition of materials such as copper, will benefit. He also said that Latin American economies, the US, Australia and Indonesia were also potential winners.
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(Reporting by Anisha Sircar in Bengaluru and Divya Chowdhury in Mumbai; Editing by Edwina Gibbs)
