Ten consequences for business of a second Trump presidency 

Donald Trump is at present polling marginally ahead of Joe Biden. It is too close to call at this distance, and events between now and November will continue to shape the outcome. However, a second Trump term is obviously a realistic prospect. Here we consider ten things global businesses should be thinking about.

1. Good for US business but a risk to rates

We expect a Trump administration would introduce a range of US business-friendly policies, including deregulation, less aggressive enforcement and cutting red tape. He has promised to extend the 2017 middle- and lower-class tax cuts beyond their 2025 expiry date and to revisit the corporate tax rate.  

Many in the American business community would welcome this. The financial services sector hopes that a relaxation of capital requirements for banks will stimulate investment and increase valuations. However, Trump is also likely to increase spending – in a much more fiscally constrained context than the one he inherited in 2017. This could drive inflation higher, inhibiting lower interest rates and creating tension with the Fed. Also, what helps business in the US may harm the business environment elsewhere.  

2. More protectionism, more uncertainty    

A hallmark of Trump’s first term was his protectionist trade agenda, and we expect the same again. Although the Biden administration has also pursued protectionist policies, Trump’s more confrontational and unpredictable style could mean this is a greater source of tension with US trading partners, including allies – particularly where the US has a trade deficit (including the EU, Mexico and China).   

Trump has pledged to impose a baseline 10% tariff on all imports, and a minimum 60% tariff on Chinese goods (rising to 200% on EVs). The US-China trade relationship will already be tense after Biden’s 14 May China-focused tariff announcement. Under Trump, it could return to a more overt trade war footing. Relations with some more like-minded countries may also deteriorate – the EU could respond by restoring tariffs linked to the US-EU steel and aluminium dispute, which are currently suspended until March 2025. 

3. Hanging tough on China   

The US position on China significantly hardened over Trump’s first term, with new tariffs on three-quarters of all imports from China and liberal use of other powers to curtail commercial and other links. Biden has preserved many of those measures and has gone further. The key difference lies in their approach and style: while China policy under Biden is the result of careful planning, policymaking under Trump it could be more capricious.  

Even if Trump wanted to do an about-face and then, for example make a ‘deal’ with China on Taiwan, the mood within the Republican Party has hardened very firmly against any such gesture. With the US-China relationship more finely balanced than ever, the key question is whether a Trump team can pursue its China agenda in a way that manages the risks and minimises fallout for US and global businesses. 

4. Putting the brakes on net zero    

Trump disparages the net zero agenda and prioritises deregulation and boosting US oil and gas production. He has taken aim at the Inflation Reduction Act (IRA) and says Biden’s focus on green energy has jeopardised US energy production and supply.   

But he is unlikely to tear down the IRA completely, not least because planned industrial investments largely flow to red states. He would be more likely to pare back targeted IRA elements, such as tax breaks and incentives for EVs. He would remain committed to the US auto industry, allowing petrol vehicles to compete unimpeded alongside EVs. He has also promised new licenses for drilling on federal land – but this would be unlikely to make a significant difference to the energy mix in the US, which is already one the world’s largest oil and gas producers. Despite his aversion to the net zero agenda in general, he would want to continue to compete with China and the EU for strategic leadership in green tech.    

5. Maintaining US tech dominance    

Trump’s track record on tech policy is uneven and his approach may become more coherent in a second term. He will prioritise America First policies, including US dominance in AI and big data analytics. He might take a more aggressive approach to EU regulations on data, AI and digital competition – which he sees as constraining US tech. On China, we would expect further aggressive US actions like the recent Executive Order on data security. Tech policy tensions with the EU and China would feed wider friction. Content moderation would become more politicised, which could be tricky for businesses that need to comply with laws in other jurisdictions.   

6. The US-Europe relationship would suffer   

The US relationship with Europe could see far-reaching change. Trump remains a vocal critic of NATO and there would be more US pressure on defence spending by European NATO members, at a time when the alliance is already stretched. Trump has a complicated relationship with Ukraine but has indicated he would push for a resolution to the conflict leaving Ukraine forced to negotiate and most likely Russia in control of eastern Ukraine and Crimea.    

Tensions over NATO would be exacerbated by Trump’s disdain for the EU. During his first term, he refused to meet with either the Commission or Council Presidents, preferring to deal bilaterally with member states. Trade tensions over tariffs and the balance of trade as well as and competition over tech would feed into this. Trump could see rising European defence budgets as an opportunity for the US defence sector but poor transatlantic relations would only feed the European discussion on strategic autonomy.

7. Trump loves a deal and personal relationships matter   

While Trump may announce new measures that apply universally to all markets, it may be possible for individual governments to negotiate exceptions. During his first term, Australia and South Korea managed to avoid hefty blanket tariffs on steel and aluminium imports.    

The ability of heads of state and business leaders to build a personal rapport could also be important. For example, his relationship with Mohammed bin Salman could further boost business links with Saudi Arabia. Similarly, we expect Trump would use his relationship with Modi to encourage India to act as a counterweight to China, potentially creating opportunities for US business in India.    

8. The relationship could be delicate for a UK Labour government     

Labour would prefer a traditional policy of strong transatlantic ties, regardless of who is in the White House. But Labour is also seeking closer political and trade relations with the EU. We would expect Trump to try to drive a wedge between them, creating hard choices for the UK government which would be amplified by parts of the UK media. A US-UK FTA will remain a long-term objective of any UK government. It is not a priority for Biden, but could be marginally more appealing to Trump – though only on his terms.     

9. A more divided America    

A second Trump administration would further deepen social divisions on issues like reproductive rights and immigration. He is leaving the former to the states, and on the latter, he has promised mass deportation of illegal migrants. Other difficult issues, such as US support for Israel, the culture wars, across the range of issues, a second Trump administration could feed domestic divisions.  For business, greater support for states’ rights in relation to the federal government may have implications for regulation and business compliance.

10. Planning ahead   

Given the range of possible ways a Trump administration could have an impact on the operating environment for global businesses, investors and corporates should be thinking about this now and contingency planning. Flint’s team includes experts in geopolitics, trade, ESG, and tech and digital regulation. Please do get in touch if you think we can help.

This blog was written by Senior Adviser Matthew Lehrfeld, Partner Sam Lowe and Manager Zoe Alipranti. Matthew was a US diplomat with two decades of experience working in leadership positions on national security and foreign policy issues in Asia, the Middle East, Europe, and Washington. Sam is a trade specialist and previously a senior research fellow at the Centre for European Reform. Zoe specialises in advising corporate and investor clients on politics, policy and regulation across various sectors.

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