In the immediate aftermath, financial markets reacted positively…
Wall street welcomed Trump’s win with yet another surge in share values to record heights as investors banked on Trump slashing corporate tax and protecting local industries with tariffs on imports. Share analysts urged investors to snap up banks, defence and energy stocks.
But the election was a bad day for any companies with ‘sun’ or ‘solar’ in their name as Trump will seek to dismantle Biden’s clean energy policies. The next day on US markets, a firm called First Solar fell over 10%, while Sunrun and Sunnova stocks plunged 30% and 45%.
If you want to cash in on the election results, they recommend buying cheap funds (ETFs) with small and mid-cap US companies who will benefit from being shielded from international competition by ‘Trump’s “America First” policy.
But think carefully before diving into any ‘Trumpy’ shares.
Firstly, any benefits will be priced in already. And secondly, there are a lot of potential downsides to Trump’s win that not priced in at all as they are impossible to evaluate. Share analysts can only work with the data they have. They can’t factor in the madness and potential chaos that will ensue from Trump’s more extreme policies.
The caveat, as ever with Trump, is that you never know what he is going to do. The last time he was President, he didn’t carry out all of his threats (where is his famous wall?) as his wilder notions were often shunted aside by his own staff.
Remember how he wanted to shoot protesters, bomb Mexico and buy Greenland the last time around? Luckily for the Inuit people of Greenland, he didn’t succeed.
But this time, the Republican party is firmly under the control of his MAGA (Make America Great Again) movement. And it also controls the House and the Senate. His intentions are better thought-out (although apparently he hasn’t dropped the idea of bombing drug cartel bases in Mexico).
He wants to punish the anti-Trump media – i.e. most of it – by taking critical networks off the airwaves. But the biggest warning sign of both financial recklessness and fascist tendencies in my mind is the intention to control US interest rates by undermining the independence of the Federal Reserve.
The independence of Central Banks is fiercely protected in most sensibly-run economies. Giving a loose-cannon like Trump a say in deciding interest rates in the world’s biggest economy is yet another ingredient in the recipe for a potential disaster.
President Erdogan of Turkey tried the same trick, leading to 90% inflation! Another threat to the sanctity of the dollar is his choice of notoriously volatile cryptocurrency bitcoin for a new national ‘reserve’ fund.
Will strikes and social unrest also follow if he tries to fire tens of thousands of State workers and deport tens of millions of migrants? And what will that do to the US economy? What will happen to US inflation when he slaps huge tariffs on imports? And how will it affect world trade?
Trump’s own former National Security Advisor John Bolton warned after the election : “On trade, the threats that he made could, if they were put into practice, crash the global economy.”
The euro fell on Trump’s triumph, as the Eurozone is now threatened with tariffs in its most important market. The euro could even “get close to parity with the greenback next year,” the Financial Times reported.
Euro weakness along with higher inflation policies across the Atlantic will make our non-European holidays more expensive and slow down further cuts in interest rates, which is bad news for borrowers.
Economists warned that these tariffs and other Trumpian policies could tip the EU economy from sluggish growth to a full-blown recession – with Ireland most in the firing line.
Trump himself openly declared that he intends to “steal jobs from other countries”. Also, unfortunately for us, the co-chair of Trump’s transition team is Mr Howard Lutnick, boss of Cantor Fitzgerald, which sells Irish Government bonds and is well aware of Ireland’s financial position.
Lutnick declared on X (formerly Twitter): “It’s nonsense that Ireland of all places runs a trade surplus at our expense…When we end this nonsense, America will be a truly great country again. You’ll be shocked!”
In the wake of an election so clearly won by America First policies, Joe Biden may well be the last president to play the Irish-American card and nurture a cosy, relationship that we’ve got used to since John F Kennedy became the first US president to visit in 1963.
It won’t hurt that much if we never see US presidents sipping pints of Guinness here – or congratulating us on our great win against the “Black & Tans” as Biden did (confusing our great rugby and War of Independence rivals!)
What will hurt though is US politicians can never again afford to turn a blind eye to Ireland profiting at the expense of their own voters out of some lingering affection for ‘the auld sod.’ Doing so would be political suicide after swathes of voters drove the immensely-flawed Donald Trump back to power for promising the opposite.
Even Latino and other emigrant community voters backed Trump despite his plan to round up and deport millions of their more recently-arrived compatriots. Trump is taking aim at any country that profits at US expense, whether it’s new foes like China or old allies like Europe – especially Ireland.
Our exporters will suffer along with everyone else from US tariffs. Far worse could be efforts to bring US multinational jobs and profits ‘back home’
Our economy is based on luring US multinationals here with low taxes. A handful of US companies pour tens of billions into our coffers to sustain relatively high State wages, welfare and pensions.
Corporate tax rocketed more than eightfold to €25bn in 2023. It’s expected to reach nearly €30bn this year – and hit €37 billion by the end of the decade.
That would pay for almost a third of everything the Irish Government spends in a year and hardly any of it – just €4bn – comes from companies based in Ireland.
If our corporate tax take dropped back to the level of a normal country (say €10bn), we would go bankrupt in no time. Now Ireland may get ‘busted’ – in more ways than one.
Government economist Stephen Kinsella noted this autumn that a Trump election was the likeliest ‘next big crisis’ to hit Ireland.
Ireland will be “wiped out”, he said, if Trump lowers US taxes (as he undoubtedly will) AND manages to lure back big tech and pharma companies (a potential outcome that is less clear-cut).
As we saw with the Apple tax case, Ireland does more than offer a low rate of corporate tax. Apple used tax loopholes to pay just 2% in tax.
Yet Trump’s team has some top business minds who should have no problem dreaming up rival schemes to entice (or threaten) US companies into moving operations back to The States.
One of them is vice-president JD Vance, whose acceptance speech whipped up the MAGA crowd by laying “bare the scale of the Republican party’s Trump-era shift away from free trade and interventionist foreign policy towards protectionism and isolationism,” the Financial Times reported.
Most of our best-paid jobs are in US multinationals – or in a State sector whose wages we can afford only because we’re awash in corporate tax revenue. Highly-paid people, many in multinationals, also pay a hugely disproportionate share of Irish income taxes, which would plummet if those companies were to leave in any numbers.
Judging by the many Donald Trump outfits worn last Halloween, Trump is seen as cutting something of a comedic figure by most Irish people. But the joke may soon be on us.
If Trump does Make America Great Again – it could be at Ireland’s expense.
Donald Trump has consistently claimed he can stop Russia’s war on Ukraine in 24 hours
Now this big promise will be put to the test – even before he takes office, he says. But at what cost will this be to Europe? Unfortunately for Europe, his intentions seem to tie in with the other thing he says most often about Ukraine: that he will cut off all aid.
Most analysts think Trump will threaten to withdraw all aid from Ukraine unless it agrees to his terms – presumably freezing the border. Kyiv seemed to pour cold water on the plan, stating it could take much longer than Trump envisages. And Russia wants Ukraine to cede even more territory and people that it has already lost.
If this typically Trumpian peace effort fails, a withdrawal of US aid to Ukraine seems likely. Trump’s sympathies seem to lie with Russia. He has had multiple ties to Russian money, which has bailed out his businesses more than once. He repeatedly praises Putin – and criticises Ukrainian President Volodymyr Zelensky.
Uncharacteristically cowed in Putin’s presence, according to former aides, Trump tweeted that Putin’s invasion was a “genius move”. He seems to have a cosy relationship with the Russian dictator, talking to him on seven private phone calls, according to renowned journalist Bob Woodward’s new book ‘War’.
Trump’s former National Security Advisor John Bolton said of his former boss’s election:” He’s delighted at getting back with his old friends (Putin and other dictators). He’ll look forward to meeting him again…all of which is bad news for Ukraine.”
In a worst case scenario, the failure of Trump’s ‘peace plan’ could lead to the withdrawal of US aid that Europe is in no position to replace.
How much this scenario could cost Europe was estimated in a recent report by the Kiel Institute. It found that “a Russian victory in Ukraine would lead to substantially higher costs for Germany (alone) via (i) increased military spending, (ii) additional refugees, and (iii) the loss of trade and investment with Ukraine. For Germany, we estimate costs of 1% to 2% of GDP annually, about 10-20 times higher than current military support levels.”
That’s a whopping €94 billion – just in Germany. If repeated across the continent, this would savage the EU economy. Even if Ukraine doesn’t collapse militarily, an unfavourable deal could lead to an influx of refugees and a massive defence cost for all of Europe faced with a resurgent Russia on its doorstep.
Ireland is already under pressure as ‘defence freeloaders’. NATO countries were lambasted by Trump for spending less than the required 2% of GDP on defence. We spend 0.2% on ours. That is hardly ‘doing our bit’ in the midst of an EU security crisis.
Listen to Bill Tyson Discuss the Implications of a Trump Presidency in the latest Your Money Your Choice Podcast in Association with Spry Finance
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