In a week, we will know if Donald Trump returns to the White House or if Kamala Harris will be the first female president of the United States. However, if Trump wins the election, Edmond de Rothschild foresees changes in American trade policy. In the past, Trump has moved toward protectionist policies, raising tariffs, and has made clear that intends to continue this approach.
This time he plans to impose a universal duty of 10-20% on all imports, which would be a relevant increase from the current average duty of 2%. Furthermore, he hinted that products from China could face tariffs of up to 60%, an impact that would have serious consequences that would affect not only China, but also its major trading partners such than the European Union. This approach could have a disruptive effect on international trade relations, affecting key sectors such as automotive and technology. According to the figures, US imports from the EU hit $450 billion in 2023and any additional tariffs would make these products significantly more expensive, affecting both American consumers (although they would benefit from income tax reductions) and European exporting companies; generating in one way or another an inflationary effect USAat least in the short term.
For Europe, Trump poses a risk of increased volatility in the short term. The fear of a resumption of the trade war, combined with political uncertainty, could weigh on certain European sectors, particularly those oriented towards exports. Furthermore, political uncertainty surrounding a possible withdrawal or weakening of the US commitment to NATO, particularly in the context of the conflict between Russia and Ukraine, would add additional pressure to markets. Fears that Trump could reduce his military support for Europe, coupled with the possibility that he will seek a quick deal with Russia, could destabilize European financial markets.because for Europe, regional security is crucial for economic stability.
However, historically, markets tend to rally after electionsregardless of the outcome, but the level of uncertainty that would accompany a Trump victory could prolong volatility for some time, especially if trade tensions escalate in European and emerging markets. The American market could, however, react positively to the expected tax cuts promised by Trump.
Thus, a Trump administration implementing aggressive trade policies could significantly reduce U.S. foreign direct investment in Europe. Trade tensions and rising tariffs would increase risks and uncertainty for U.S. companies operating in Europe, particularly in sectors such as automobiles, technology and pharmaceuticals.
Under a Trump-led administration, US-EU trade relations would be marked by protectionism and greater economic rivalry. Trump advocated a unilateral approach with America firsthence the use of customs duties to level the playing field in trade, which would likely mean that EU exports, particularly in sectors such as automobiles, machinery and electronics, would be in the crosshairs of new tariff taxes. Trump has already threatened in the past to impose 25% tariffs on European car exports.which would represent a very relevant additional cost for European manufacturers, at a time when Chinese competition is accelerating with the development of electric vehicles. He is also likely to use tariffs as a negotiating tool to pressure the EU into making concessions in other sectors, such as agriculture, where the United States has long sought to obtain better access to the European market. Additionally, Trump’s approach to deregulation in the United States, particularly in sectors such as energy, but also in the health and technology sectors, this could increase the competitiveness of American companies compared to European companies. This could push the EU to tighten its own trade policy and resort to retaliation, which would have a negative effect on relations.
In 2023, EU exports to the United States represented just over 2.5% of the Union’s GDP, while US exports to the EU were equivalent to only 1.5% of its GDP. Despite this, investments by American companies have reached nearly $3 billion in Europe, the leading destination for American multinationals. But this asymmetrical dependence places Europe in a more vulnerable position in the face of Trump’s protectionist policies. Furthermore, Europe’s need to maintain a trading relationship with China could be undermined if the United States steps up pressure for Europe to follow suit in restricting trade with China. On the side of the American administration, Trump’s victory could bring the American budget deficit to a level between 6 and 7.5 trillion dollars by 2035 (according to different models), which would put pressure on economic stability, indirectly affecting investments in Europe.
If we talk about sectors, the most vulnerable to a Trump victory would be those that rely heavily on exports to the United States. Like for example the automotive sector. Considering that exports in this sector reach a value of over 60 billion euros per year, imposing a 25% customs duty on vehicles – as has been suggested – could significantly reduce competitiveness European manufacturers like Volkswagen, BMW and Mercedes. in the American market. Which, presumably, would affect both sales and profit margins. Porsche, which manufactures mainly in Germany, could be even more affected. The consumer discretionary sector would also be affected.
Europe exports luxury and consumer goods. Companies like Louis Vuitton or Gucci could face a drop in demand due to rising prices in the American market. Likewise, companies that rely on global supply chains, like Apple, could face tariffs on European and Chinese components, jeopardizing the profitability of their operations in Europe.
Additionally, the renewable energy sector could also suffer under the Trump administration.. Companies like Siemens or Schneider Electric, which are investing heavily in clean energy and electrification, could be harmed if the United States reduces its support for renewable energy in favor of fossil fuels. This would affect global energy transition dynamics, particularly in Europe, where efforts to combat climate change have been at the forefront of government policies.
It is true that the EU is working to diversify its trade relations and reduce its dependence on the United States, in anticipation of a possible repeat of Trump’s protectionist policies. In recent years, the EU has signed trade agreements with countries such as Japan and Canada. and stepped up efforts to reach agreements with countries in Latin America and Asia. Additionally, the EU is strengthening its internal supply chains, particularly in critical sectors such as technology and renewable energy, to mitigate the effects of a possible trade war with the United States.
In this sense, the investment program of Green Deal The European Union, which is mobilizing more than 1 trillion euros to promote the energy transition, is a clear example of how the EU is preparing its economies to resist the negative impacts of US protectionist policies. On the other hand, The EU is also expected to resort to retaliatory tariffs, as it has done in previous trade disputes with the Trump administration.. These tariffs would target key U.S. products, such as motorcycles, fashion and agricultural products, which could increase tensions and trigger a full-scale trade war.
At the investment level, there are a number of key factors to consider when assessing the impact of a Trump victory. First, fiscal policy, including corporate tax cuts, could benefit certain sectors in the United States. In the case of the financial sector, with further deregulation, less monopolistic control or liberalization of the crypto-asset sector or the consumer discretionary sector, lower taxes or traditional energy, with less regulation of issues environmental. Thus, Trump’s policies transferred to corporate America could increase SP 500 earnings per share (EPS) in the short term by 3-4%, while a Harris victory could reduce them by around 6% in the short term. 8.%.
On the other hand, the Trump administration will put pressure on European countries to restrict their trade with China, which could put Europe in a complicated situation. since China is a key trading partner. Therefore, investors should prepare for increased volatility in certain parts of the market and those with exposure to sectors sensitive to trade tensions should evaluate strategies to diversify or temporarily mitigate this event.
