Explainer
More
tariffs, less red tape: what Trump will mean for key global industries
Returning US
president has promised protectionist trade measures, relaxed regulation and
cheaper energy for consumers
Jasper
Jolly, Dan Milmo, Jillian Ambrose and Jack Simpson
Thu 7 Nov
2024 07.00 CET
Donald
Trump’s victory in the US presidential election left investors and business
leaders across the globe scrambling to assess what his return to the White
House will mean.
Stock
markets, the dollar and bitcoin rallied in the immediate aftermath of his win,
while shares in defence companies, prison operators and Elon Musk’s Tesla rose
sharply. Meanwhile, renewable energy companies’ and German carmakers’ stocks
fell. Here, we study the outlook for key industries.
Manufacturing
and cars
Global
manufacturers are firmly in Trump’s sights. Threatened 10% tariffs on all goods
imports – and up to 60% and 100% for China and Mexico respectively – would
inevitably be passed on to US buyers, raising prices and depressing import
volumes.
Pharmaceutical,
automotive, and chemicals are the most exposed industries because they
represent the lion’s share of European exports to the US, according to
Morningstar DBRS, a credit rating agency. The share prices of European
carmakers including BMW and Mercedes-Benz dropped steeply on Wednesday.
Vaccine
makers around the world such as Pfizer, BioNTech and GSK will be watching
Trump’s appointments closely, after the president-elect indicated he will
discuss policy with antivax ally Robert F Kennedy Jr.
In the
longer term, more international manufacturers may try to get inside the
protectionist wall, by building US factories. Volkswagen’s Audi and Porsche
subsidiaries could be particularly vulnerable because they lack American
factories.
“I want
German car companies to become American car companies,” Trump said at a rally
last month. “I want them to build their plants here.”
Technology
Tech is a
key industry for the US economy and Trump has already signalled support for the
cryptocurrency sector.
He has gone
so far as to give a keynote speech at the annual Bitcoin Conference in
Nashville where he pledged to “ensure that the US will be the crypto capital of
the planet”. He went on to promise that he will fire Gary Gensler, the
crypto-sceptic head of the US financial regulator the Securities and Exchange
Commission.
Trump has
also indicated that oversight of artificial intelligence, which has been the
focus of a multi-billion dollar investment boom, will be relaxed. There is also
widespread expectation that Lina Khan, the head of the Federal Trade Commission
and a champion of a tough approach to the big tech firms, will be replaced.
But the
ever-mercurial Trump has also voiced hostility towards important players, for
instance saying he would “do something” about Google’s power, and threatening
Meta’s Mark Zuckerberg with jail. TikTok, previously in Trump’s crosshairs,
could be saved from a forced sale, however, with Trump pledging to “save” an
app he had tried to ban during his first presidency.
Elon Musk
will certainly be in Trump’s favour. The Tesla CEO and owner of X – as well as
SpaceX, Neuralink and xAI – is a “star”, according to Trump.
Energy
Trump
stormed to power with the promise to hand Americans the “lowest cost of energy
of any industrial country anywhere on Earth”.
His plan
includes wringing as much oil and gas from the US as possible by removing red
tape and opening up federal land for new fracking projects. The impact is
likely to be more marginal than environmentalists fear, according to analysts.
But his plan
to bring Joe Biden’s burgeoning green economy to heel has already wiped
billions from the market value of big European renewables developers.
Trump’s
election triumph slashed €17bn from Denmark’s wind power giant Ørsted after its
shares slumped by 11% on the Copenhagen Stock Exchange.
Vestas, a
Danish wind turbine developer, lost 10% of its market value and is now worth
€137bn. Shares in Spain’s Iberdrola, a leading renewables developer and the
owner of Scottish Power, slipped by 4% to shave over €3.4bn from its shares.
Experts
believe it is possible, but unlikely, that Trump would repeal Biden’s Inflation
Reduction Act, which stands to inject about $433bn in grants, loans and tax
incentives to healthcare, utilities and clean-energy companies and benefit many
of the “red states” which helped him to power.
Aerospace
and defence
Commercial
aerospace companies could also be caught up in tariffs. Airbus, the world’s
largest planemaker, has already said it will pass them on to airline customers
– as it did with tariffs imposed in 2020.
Robert
Stallard, an analyst at Vertical Research Partners, said the US planemaker
Boeing would also be vulnerable if tit-for-tat tariffs take their toll.
“Whatever occurs, tariffs on new aircraft are very likely to mean higher
airline ticket prices,” he said.
The
prospects for weapons manufacturers will depend on Trump’s foreign policy
positions. With an isolationist White House, the EU may feel that it should
increase defence spending. That could eventually benefit European arms makers
like the UK’s BAE Systems and Germany’s Rheinmetall.
For the big
US defence companies such as Lockheed Martin, RTX and Northrup Grumman, Trump’s
pledge to “strengthen and modernise” the military with US kit could mean
increased orders. On the other hand, his pledge to “stop wars” could imply a
smaller military in the future – if he follows through.
Food and
freight
The
immediate aftermath of Trump’s win gave an insight into what his trade policies
could mean for the food and farming industry: Chicago’s soya bean futures fell
by almost 2% while wheat and corn prices also dropped, largely due to fears
over a new trade war with China.
During the
last Trump administration soya bean farmers in the US, which relies on the
Chinese market, were hit by retaliatory tariffs that cut demand, and saw supply
shift to Brazil and Argentina.
The EU’s
food and wine industry could face challenges too. In 2019 European cheese and
wine was hit with tit-for-tat tariffs after a disagreement over the EU paying
subsidies to aerospace giant Airbus.
Domestically,
Trump plans to halt legislation to ban price gouging by large food
corporations, suggesting that his economic policies would bring prices down.
The global
shipping industry is worried fresh trade wars under Trump could see a new spike
in container prices. The ocean freight intelligence platform Xeneta warned that
shipping container rates grew by 70% during the last Trump administration.
The Red Sea
crisis has already seen traders face huge price hikes, with fourfold increases
compared with last year in some cases.
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