Insights

With the election of Donald Trump to a second term as President, all eyes turn to what’s next in the U.S. and global economy.

For businesses and executives, there are clear signs of potential positive momentum, tinged with questions for the longer run, especially for multinational and non-U.S. based companies.

A momentum moment

For the U.S. economy, Trump’s reelection moment may catalyze a period of momentum that propels markets higher.  That potential for momentum was reflected in initial investor sentiment, with the S&P 500 pushing upward approximately 2% in the opening moments of trading the morning after the election.

If the Federal Reserve continues its push to lower interest rates, and businesses seize on the likelihood of reduced regulation, lower taxes, and the removal of election season uncertainty, then we may see a wave of corporate investment, hiring and consumer confidence that will buoy profits, share prices and valuations.

On the regulatory front, it seems clear that appointees like Lina Khan at the Federal Trade Commission will be replaced by smaller government, anti-regulation nominees.  In the financial sector, bank M&A has been slowed by prolonged regulatory reviews of pending deals, which will undoubtedly be reversed in a second Trump Administration.  And, the Justice Department’s increasingly active pursuit of antitrust cases should abate. 

This will likely mean an uptick in transaction activity across sectors, but particularly in tech and financial services.  Such an uptick in corporate deal activity can create a flywheel economic effect that is beneficial to investors, though the effect on employment must be monitored carefully.

What of tariffs and trade?

For non-U.S. companies, and those that trade across borders, the picture is more uncertain.

The first Trump Administration was marked with significant, and sometimes surprising, trade disputes, often with traditional economic and geopolitical allies.  There was a fight with Canada over lumber, tariffs on French wine, and a burgeoning trade war with China that continued into the Biden Administration. 

Over the course of the 2024 campaign, Trump ramped up his rhetoric on tariffs, proposing 60% duties on goods from China, a 20% tax on goods imported from any other country, and punitive tariffs on companies like John Deere that move manufacturing out of the United States. 

While Conservative economic orthodoxy would oppose such moves, Trump will have the opportunity to pressure his party to support him on trade, especially with a Republican Senate, and a seemingly likely Republican House of Representatives.  Global corporates will need to watch closely – and engage heavily – to shape the potential compromises in this area, as the few remaining moderate Republicans may be open to pushing for toned down versions of Trump’s proposals.

If Trump is successful on tariffs, it could blunt economic momentum, despite the overall eased regulatory approach he’s likely to take.

Broader uncertainty

The animating feature of the first Trump Administration for businesses and executives was uncertainty.  With a President prone to governing by Tweet, corporates had to watch minute-by-minute lest their firms or industries come under rhetorical or policy pressure unexpectedly.

Much has been made of Trump’s campaign trail focus on retribution – both on policy matters, as with tariffs, and politically.

While some might take comfort in Trump’s election night statement about his intention to “heal our country,” it behooves corporate leaders to watch carefully for signals about how a second Trump Administration might affect their companies and sectors in unanticipated ways.  Monitoring and contingency planning should start immediately.

If you’d like to speak to Hawthorn about our offering in the U.S., please email Andrew Wilson at a.wilson@hawthornadvisors.com