Hanover

9 Nov 2016

Trump has won. Clinton has conceded. Yet again, the pollsters are red-faced. As the final results come in, what does a Trump presidency mean for the UK, and for the business community?

With the trans-Atlantic trade deal (TTIP) now dead in the water, progress towards a US-UK agreement could accelerate. During the campaign, Trump’s own trade adviser, Dan DiMicco, countered Barack Obama’s stance by denying that Britain would be ‘at the back of the queue’. But a new trade deal will likely take years to conclude once the UK leaves the EU, and will be negotiated against a headwind of protectionist sentiment.

On both sides of the Atlantic, immigration and trade are in the spotlight, and Trump very overtly said he was going to ‘do a Brexit’. His victory can be seen as a popular reaction to globalisation by those who feel they have been left behind. Yet there are clear differences. British ministers and diplomats are scouring the globe to forge future trade deals. While the UK is officially seeking to maintain as close a trading relationship as possible with its neighbours, the Trump campaign has looked more sceptically at the impact of China and Mexico in ‘stealing US prosperity’.

Number 10 has already congratulated Trump on his election, citing ‘an enduring and special relationship’. But it’s not clear that May and Trump will build a rapport to match that of Thatcher and Reagan. While still Home Secretary, she described his views on Muslims as ‘divisive, unhelpful and wrong’. Nor is there much love lost between Trump and the mainstream Brexit camp. One leading Leave campaigner has already said any comparisons between Trump and Vote Leave are ‘warped’, pointing out that Vote Leave ran a more ‘positive’ campaign.

Pundits have often pointed to the difficulty of defining the Trump policy agenda. To understand the direction of travel, we will have to consider how Trump will work with the fiscal hawks in a Republican-controlled Congress, and whether he now chooses to appoint a team of new advisers that match the populist tone of his campaign, or instead pivots by appointing establishment Republicans to top posts.

As results come in, Trump’s ‘rust-belt’ electoral strategy seems to be paying dividends, and would suggest a strong protectionist turn for US heavy industry and especially the automotive sector. But this depends on Congress granting him authority to prop up US manufacturing while also delivering on his tax-cutting agenda. The Trump win could also augur well for the defence sector and manufacturing more generally – which is already looking forward to a support package from the Chancellor in the Autumn Statement.

Despite his fierce criticism of Wall Street, a Trump presidency is unlikely to lead to further punitive regulation, although rolling back the landmark Dodd Frank reforms could jar with his populist campaign and blue-collar base. Banks will be looking to his choice as Treasury Secretary as an indicator of his intentions. There have been reports that Trump is considering his campaign finance chairman, Steven Mnuchin, a former investment banker – a choice that may be welcomed by US banks.

A Trump presidency could also boost support for infrastructure investment – one of the few areas where he may find common ground with Democrats, if they can agree a means of funding. In his victory speech, Trump reaffirmed his intentions in this area, stating: “We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we’re going to put millions of people to work as we rebuild it.”

In healthcare, the pharmaceutical sector was braced for a Clinton intervention on drug prices, but a Trump presidency may be no less tough. This, along with new frameworks to test the cost-effectiveness of medicines in the US, means pricing will be under pressure in what has traditionally been the world’s key market.

A U-turn in US energy and climate change policy also now seems inevitable. Trump has been a strong supporter of the ‘Keystone pipeline’, and his election will mean more emphatic US support for domestic coal and shale gas production, with the associated knock-on impacts for global commodity benchmark prices. On climate change, Trump couldn’t have been clearer: the progress under Obama, however tentative at times, will hit reverse.

For the tech sector, there is a massive cultural divide between the Silicon Valley worldview and Trump’s background in ‘bricks and mortar’ property deals. Yet in fact he said very little about technology during the campaign and may be expected to outsource decision-making on America’s digital future. Trump did vow to block the AT&T-Time Warner deal on the basis that it would give the new company ‘too much concentration of power’, but otherwise he projects himself as pro-business and anti-regulation. A Republican-controlled Congress could now smooth arrangements for trans-Atlantic data flows, particularly for law enforcement and security.

The Kremlin is probably celebrating today. Trump had praised Putin as a strong leader, and the Russian president has already sent Trump a telegram expressing ‘hope for cooperation in ending a crisis in Russian-American relations’. Russia may test whether the ‘softly-softly’ approach will smooth over tensions and make it easier to assert their influence in Eastern Europe. Tensions are also likely to emerge with NATO allies, as Trump has indicated that he may take a more isolationist approach and increase pressure on European partners to pay their way. The reaction in Beijing, and developments in the South China Sea, will also be carefully watched.

The political rule book has been torn up time and again over the past year. Trump has truly delivered on his promise to deliver a result that is ‘Brexit plus plus plus’. His early moves will give us an indication as to how far he now intends to carry forward his insurgency into the White House, and onto the world stage.