While we can’t be certain whether the immediate financial-market reactions to his election will continue for the length of a Trump presidency, we think that some of the policies proposed by the incoming administration give even more reasons than ever to make sure that your investments are aligned with your values.
Last week, we posted our thoughts on the possible / promised changes to the tax code in the US. And here is the second in our series of five posts on the possible fallout from this election, and what we can do about it.
2: International Trade
While on the campaign trail, Trump departed from Republican Party orthodoxy by opposing various “free trade” agreements — not just the new “Trans-Pacific Partnership” (TPP), but also NAFTA and several other older trade agreements — and he all but promised trade war with China, saying he wants them to be declared a “currency manipulator” and urging stiff tariffs and taxes on Chinese goods. More recently, on November 22, Trump released a video about his plans for his first hundred days in office, in which he promised to replace multi-lateral trade treaties (especially TPP) with re-negotiated “fair, bilateral trade deals”.
While Obama has been a big supporter of international trade agreements, in particular the TPP, and Secretary Clinton only recently came out against the TPP, many economists argue that Trump’s proposals could cause a severe global recession and “stagflation”, and would effectively freeze global trade, kicking off a global trade war. So while many on the left were surprised by, and tentatively support, Trump’s rejection of the TPP, the long-term impact of Trump’s trade-related proposals “will depend on how much Trump can and will actually try to pass when he steps into the Oval Office”.
Again, as investors, there’s not a lot we can do directly to affect a Trump administration’s views on international trade issues. We can, though, use our shareowner advocacy tools to find out which corporations spent money lobbying legislators to pass TPP — urging corporations to be transparent about their lobbying and political giving has become a very important issue in the wake of Citizens United. There are clearly some things to be concerned about in the TPP and other trade deals; rather than reject them out of hand, though, we might need to review the details of these arrangements, and find out what might work and what needs renegotiating. And then we should contact our Senators and Representatives, to urge them to take a smart approach to trade regulation.
Speaking of regulation — Part 3: Trump’s proposals to “reduce the regulatory burden” on American business.