Trump’s stance on imposing significant new tariffs on imported goods, especially from China, is expected to lead to higher inflation. Trump has suggested Tariffs on goods from China in the range of 50% - 60% with a 10% to 20% tariff on all imported goods. These tariffs could increase the cost of goods for consumers and businesses, potentially slowing economic growth. On the other hand, these measures aim to protect domestic industries and reduce the trade deficit, which could benefit certain sectors in the short term.
Stricter immigration laws under Trump’s administration could impact the labour market and industries that rely heavily on immigrant labour. This could lead to labour shortages in sectors such as agriculture, construction, and hospitality, potentially driving up wages and production costs.
Higher tariffs could lead to increased inflation, prompting the Federal Reserve to consider raising interest rates to curb inflationary pressures. Higher interest rates could, in turn, impact borrowing costs for businesses and consumers, potentially slowing down economic growth.
A potential inflationary offset to these policies is Trump’s clear support for US oil and Gas production. The potential policy on oil and gas production under President Trump's administration could have significant implications for inflation. Reducing Royalties and red tape to approve oil and gas projects could enable increased domestic production and reduce reliance on imports, the policy aims to lower energy costs and enhance energy security. However, as a globally priced commodity with OPEC a significant producer there may be adjustments in production outside the US that offset any price reduction.
Certain sectors, such as domestic manufacturing and energy, may benefit from Trump’s policies aimed at boosting domestic production and reducing imports and significant trade imbalances on a country/region by country/region basis. Conversely, sectors that rely on global supply chains and international markets may face challenges.
The stock market may experience increased volatility as investors react to the uncertainty surrounding trade policies and their potential impact on corporate earnings. Sectors heavily reliant on international trade, such as technology and manufacturing, could be particularly affected.
