HSBC Economist Warns Of Commodity Market Risks Under Potential Trump Presidency

Commodity markets face a greater risk of fragmentation in the event of another Donald Trump presidency, an HSBC economist noted on Friday.

At the first U.S. presidential debate on June 27, President Joe Biden had a weak start, leading to increased speculation about the possibility of the former president returning to the White House. This concern also takes into consideration Trump's policies and the proposed tariffs on China.

While commodity markets must contend with high prices driven by constraints in the supply structure, they still have to face geopolitical tensions, according to HSBC's chief economist for global communities, Australia, and New Zealand.

"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 mentioned to the Reuters Global Markets Forum.

"This would increase the risk of greater fragmentation of commodity markets and create a supply disruption supporting commodity prices," he further added.

Bloxham also mentioned that the energy transition, climate change, and geopolitics are driving a "super squeeze" in the global commodity market, Reuters reported.

In May, HSBC's statistical model indicated a shift from a "weak bull" phase to a "super bull" in commodities despite elevated prices. HSBC stated that it is very unlikely for commodity prices to revert to their previous trend, adding that prices will stay "permanently higher."

Bloxham expects large producers, particularly those in energy transition materials like copper, to benefit. He specifically identified Australia, Indonesia, and the United States.