Winners and Losers of the US Election: The Corporates

Winners and Losers of the US Election: The Corporates

It was a surprise victory at this year’s US election, but there are some early indications of what a Donald Trump presidency may mean for large businesses.

As Donald Trump prepares to ascend to the White House in January, the world is speculating on how businesses big and small will be treated by the billionaire tycoon. Here is an overview of the many areas his campaign touched on and the ramifications we might expect over the coming four years.

Renewable energy

COP21, last year’s United Nations Climate Change Conference, was the first such meeting of global leaders in which both the US and China agreed to work towards carbon emissions targets; the agreement was ratified by the two countries earlier this year. Trump commented throughout his campaign that he would move away from the long-fought-for agreement, and on the morning of the election announcement investors took note: shares in Vestas, the world’s largest turbine maker, were down 6.2%.

But not all are pessimistic about the prospects for a low-carbon economy. Climate change specialist Professor Corinne Le Quéré at the University of East Anglia commented that Trump may be convinced of the economic arguments: “As Trump is reminded of the damages that climate change is already making to the US economy – particularly through flooding and increasing damage in US coasts from the combination of sea-level rise and hurricanes – he might choose a different view on climate change than he’s expressed in the past.”

Healthcare

Since Obamacare’s inception in 2014, it has been hailed both as a step forward in healthcare provision and criticised as inefficient and reducing choice. But the new president-elect has said he will replace it – with what is as yet unknown.

It is anticipated that competition will be encouraged between pharmaceutical companies, which could put downward pressure on pricing. Liz Ward, principal at intellectual property specialists Virtuoso Legal, says that if the Affordable Care Act is repealed, the market for pharmaceuticals in the US could become much smaller. At the same time, she points to the success of British drug companies exporting to the US, saying: “They’re not frightened of buying high-end medicines and technology,” although the Food and Drug Administration (FDA) “puts a break on approvals” in what is already an economy with a protectionist mindset. Trump’s presidency could strengthen this.

Infrastructure

“We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.” So said Donald Trump in his victory speech, and shares in Caterpillar, US Steel and Steel Dynamics surged in response on the morning of the election victory.

John Pettigrew, chief executive of the UK’s National Grid – which operates gas and electricity distribution in the US – welcomed the president-elect’s comments with the hope that large-scale projects could be a boost for the British company.

Production and protectionism

Trump emphasised during his campaign the importance of providing Americans with jobs, specifically blue-collar jobs. Taxes could be levelled on US companies that produce goods overseas and want to sell to their home market, and Trump has suggested he would entirely renegotiate or else terminate NAFTA, the free trade deal between Canada, Mexico and the US.

A General Motors official was quoted by the Financial Times as suggesting that producing cars in the US would not be competitive, however. GM has a factory in Mexico and Ford plans to move some of its production there. Were Trump to make such a move uneconomical, it’s unlikely that Mexico’s leaders would give up the factories without a fight; Mexican central bank governor Agustin Carstens has said that the country is preparing for a contingency plan.

“A Trump White House will, if true to his rhetoric, make future [trade] deals harder to make in a way that is mutually beneficial. They will only pass if they put America first”

Simon French, chief economist, Panmure Gordon

Nonetheless, FTSE 250 company Tate & Lyle had 12% of its market value wiped off in response to the election; it earns 10% of its earnings in pesos, according to the Financial Times.

Ward says that it is already the case that UK companies succeed more easily in the US when they establish a physical presence, employ Americans and show themselves to be producing their products in the country; it seems likely that this benefit will be felt more strongly during the Trump presidency.

Relationships with the UK and EU

As the UK enters a tumultuous political period, Trump has so far spent more time with former UKIP leader Nigel Farage – who briefly joined Trump’s electoral campaign – than the UK prime minister. Theresa May has yet to meet the president-elect, although she has congratulated him in a statement released by Downing Street and suggested a desire to maintain a ‘special relationship’ with the US.

Trump hinted earlier this summer that the UK would receive preferential treatment regarding trade deals, though no specific details were released.

The US is the single largest importer of goods from the UK, with machinery and equipment, chemicals and manufactured goods the most popular items. The recent decline in the value of the pound has meant that US buyers can make their purchases at preferential rates.

The Confederation of British Industry (CBI) told the BBC: “British companies support over a million jobs in the US, stretching from Alaska to New York… we hope that the president-elect is committed to building on, and developing, this unique political and trading partnership.”

Trading partners

Obama’s last years in office have seen trade relations with Cuba and Iran being extended and restored, but have also witnessed the apparent collapse of the Transatlantic Trade and Investment Partnership (TTIP) deal.

Trump, meanwhile, has offered a warm hand to Russia’s Vladimir Putin and indicated that China is getting too good a deal from its trading relationships with the US.

Simon French, chief economist at investment bank Panmure Gordon, says: “The key to election victory for Trump was open hostility to free trade with NAFTA partners and the attacks on TTIP and TPP [Trans-Pacific Partnership]. A Trump White House will, if true to his rhetoric, make future deals harder to make in a way that is mutually beneficial. They will only pass if they put America first.”

He adds that, more broadly, there’s an environment “across the world which is dealing with the same protectionist movements.” He says: “You have the conditions for a sharp retrenchment in appetite for new deals. [That’s] fine if you have deals; hard work if you are on the hunt for new ones.”

Tax

Trump has suggested slashing corporation tax for US companies from 35% to 15% and providing incentives for removing profits stashed offshore. If implemented, corporations could dramatically change their tactics for raising funding.

Kevin Phillips, international tax partner at professional services firm Moore Stephens, anticipates that this could also have an impact on mergers and acquisitions. “It remains to be seen whether US companies would engage in less overseas M&A if the tax rates for repatriating earnings were to drop,” he says. “That huge cash pile of repatriated profits has been seen by some as a war chest for M&A deals.”

However, Peter Duff, partner at Morisons Solicitors, is sceptical about Trump’s ability to turn tax on its head: “The concern is that, without any political experience, he may take some time to get around him the necessary experience to provide detail on policy. Discussion on such matters appears to have taken a back seat in this election. He will have to work very hard to steady the markets, which view with scepticism his rather extreme and in some ways naive views on tax and trade.”

By Octavia Bell

 

Comments

No comments made yet. Be the first to submit a comment
Already Registered? Login Here
Guest
Wednesday, 14 November 2018
If you'd like to register, please fill in the username, password and name fields.

Member Login

Business Insights & Tips

Leaderboard

1
Michael Lane
784 Points
2
Jill Holtz
768 Points
3
Ron Immink
732 Points
4
Fionan Murray
689 Points
5
ContentLive
270 Points
View Leaderboard