The world is still holding its breath in the wake of Donald Trump’s election victory. A billionaire reality TV star who has been declared bankrupt four times and is currently facing 75 active lawsuits (not to mention his the tone of his campaign) as President-Elect, puts many of us in a very strange place.
However, just days after the most insane election in US history, one thing is becoming clearer; what a Trump Presidency could mean for your industry, and thus your business. We take a brief look at four key sectors which could be set to prosper, or tumble.
A Trump win currently seems like good news for the drug industry. Shares in major drug companies in Europe, such as GSK, Roche, Novo Nordisk, Novartis, Sanofi and AstraZeneca, went up by as much as 3% – 6% after Trump was elected last week. In fact, healthcare saw the largest stock market gains of any sector in Europe.
Throughout 2015 and the run-up to the election Hilary Clinton had speculated at Pharmaceutical industry ‘price gouging’, with both Clinton and President Obama keen to force drug prices down to support the Affordable Care Act (Obamacare).
Drug manufacturers will be relieved to hear of the President-Elect’s desire to repeal or amend the Act, paving the way for Pharma to maintain their price parity within the US, their largest market.
A Trump win is potentially bad news for major American domestic brands like Ford, Fiat-Chrysler and GM, as globalisation becomes a greater part of their business models. According to Cars.com American Made Index these brands have more than 75% of their manufacturing & assembly (on some models) outside the US. Their international competitors, Nissan, Toyota and Honda, have focused energy on being ‘Made in the USA’.
The President-Elect is against moves to take car production out of America to parts of the world with lower labour and production costs, such as Mexico. Trump is threatening to impose a 35% import tax on any brand that takes production overseas and then ships its cars back into the US. Higher taxes lead to higher prices, which could be bad news for brands like Ford, GM and Fiat-Chrysler.
After American Automotive’s (GM, Chrysler, Ford) recent recovery post Bush/Obama $80 billion bailouts Trump’s focus on re-shoring will come as a blow to their new found competitiveness. It will however benefit Asian brands, such as Toyota, Nissan and Honda, who have invested heavily in building cars on US soil and put many prestige European brands, such as Mercedes, BMW and Audi, on an even footing with US domestic businesses.
A Trump win is good news for the banking sector, which is still reeling from the financial crash in 2008. As Trump passed the 270 seat mark to win the White House, banks in the US and Europe felt more optimistic about the future – given the new President is known to favour less regulation for financial institutions. Less regulation on the banks traditionally means ‘boom time’ – with greater levels of lending and risk.
Using the stock market as our barometer, shares in banks – even Deutsche Bank, which is facing a fine of up to $14bn from the US Department of Justice for its part in the mis-selling of mortgage securities in the US in the run up to the financial crisis nearly ten years ago – rose on the news that Trump had won.
However, European banking won’t be celebrating too quickly, the potential relaxation from scrutiny from the US Department of Justice will be welcome, but until Brexit becomes clearer, Financial Services will be sitting tight, just a few less glances over its shoulder.
A Trump win could be bad news for US tech companies like Apple who have invested heavily in off-shoring to countries such as China.
The Republican President-Elect is on a mission to use immigration control and higher taxes on imports from Asia, China in particular, to drive up wages and create employment for “millions of our people” in America. Trump has turned the spotlight on Apple as an example of an American company which is undermining peoples’ incomes and job opportunities in the US by building production bases and supply chains across China, not at home. This means Apple could face a new 45% import tax – increasing the cost of an iPhone by hundreds of dollars.
Apple are on a potential collision course with Trump because it says it can’t find the high tech skills it needs in the US to produce phones and computers to the standard that the Apple brand is famous for. This scenario is true of many technology businesses that share the US as one of their largest markets, yet use low-cost skilled labour abroad for production.
And what about the rest?
There are other sectors set to benefit from Trump being in the White House, such as energy (that’s coal and fracking, not renewables), the defence industry, which is traditionally seen by Republicans as a positive force for jobs and the economy as well as security (which in Trump’s world means ‘knocking the hell out of Isil’). And there are more potential losers too, such as Amazon, which has faced heavy criticism from Trump over how much tax the company pays. During his election campaign, Trump said if Amazon was forced to pay “fair taxes” its stock market value would crash and the company would crumple like a paper bag. When Trump was elected last week, Amazon’s share price went down by 2%.
What does this mean for European and Asian marketers?
The clear message is that if your business is selling into the US, then there is no clear message…yet. If your business is American it seems that ‘domestic production’ are your safe words.
As European marketers Brexit is likely to be top of your list of concerns, however we should all watch out for signs that indicate whether the US market is about to become a harder place to do business or the field is about to be levelled.
An increase on import taxes, especially for US companies that have off-shored, will put pressure on prices, demand and thus profits.
This could manifest in European businesses having to work harder to grow market share in countries outside of the US to shore up profits. In some cases, particularly Automotive and Tech, import taxes levied on US brands could bring opportunity for European & Asian based companies – by taxing Ford, GM, Apple or HP on imports their prices will rise closer to that of a BMW, Mercedes, Nissan and Toyota in the Auto space and Samsung, Lenovo, Nokia, Alcatel-Lucent in the Tech space, providing new opportunities.
Like Brexit, time will tell, and here at Addition+ we will be monitoring things closely.