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Robert Broughton, investment director at Rathbones Investment Management International, outlines some of the economic measures the president-elect is likely to introduce
WE wrote about the implications of a Trump US presidential win ahead of the election and so his victory and re-election as President of the United States on 6 November looks likely to usher in a new wave of “America First” policies, impacting global markets and reshaping economic dynamics.
His administration is prioritising significant tax cuts, protectionist trade measures, immigration restrictions and industry deregulation. With respect to his key economic policies, one of Trump’s hallmark proposals is slashing corporate taxes from 21% to 15%, which could deliver a boost to US equities.
Additionally, tax cuts introduced in 2016 for small businesses and households will remain in place, despite their high fiscal cost. These changes have driven optimism in stock markets, although concerns persist about ballooning government deficits.
Protectionism also now takes centre stage, and Trump’s trade strategy continues to target global imports, particularly from China, with talk about tariffs of up to 60% on Chinese goods and 10% to 20% on imports from other countries.
These measures aim to bolster domestic industries but risk heightening trade tensions and disrupting supply chains. Immigration and deregulation will also be a significant focus, with the administration planning to impose severe restrictions on immigration, aligning with its broader “America First” agenda.
At the same time, key industries, such as oil, gas and banking, are set to benefit from potential deregulation, which could spur growth but which raises environmental and financial oversight concerns.
In terms of the market reaction, US stocks have surged on the back of these pro-business policies, and bond markets are experiencing a downturn. Investors in fixed income are wary of the inflationary risks posed by unchecked government spending and restrictions on immigration, as well as the risk of ballooning debt owing to reduced tax revenues. As the new administration embarks on its second term, markets are poised for significant shifts.
The policies could deliver gains for shareholders and domestic industries, but long-term economic stability and international relations remain at risk. As ever, experience suggests that investors should stay focused on the broader drivers of long-term performance and be wary of overreacting to short-term moves around the vote, particularly when it comes to choosing between sectors.
