Who wins the US Presidential elections will global implications and, depending on what the winner does, could indirectly impact many people in the UK too
The US Presidential election is now well underway with Donald Trump currently surging ahead in the race to the White House.
But if it feels like events thousands of miles away are remote from what’s happening here, think again. It’s not just the geopolitical nature of the result that will could send shockwaves around the world. There’s also a chance – depending on who wins, and what they do – that it will impact your own finances in some way or other.
Some economists believe that if there is a Trump victory, US gross domestic product (GDP) would be lower and US inflation would be higher, due to his higher import tariffs and lower immigration policies. Paul Dales of Capital Economics told i newspaper that the funds rate from the US Federal Reserve would be 0.5 percentage points higher than otherwise.
He said: “That would put some upward pressure on UK gilt yields and mean mortgage rates for UK households are a bit higher than otherwise. A more inflationary global environment may mean the Bank of England cuts interest rates by less than otherwise.” If the Bank of England were to cut interest rates by less, it could mean mortgage rates stay higher for longer.
Investment bank Peel Hunt has issued a note in which it considers one aspect, in terms of the possible impact on UK stock markets and companies based here. And that matters for very many people in this country, whether they owns shares directly, through an ISA or via their pension when it is invested in equities. Or there’s the fall-out from companies, if negatively impacted, and jobs and wages.
Peel Hunt’s conclusions? That whether Democrat Harris or Republican Trump win, their policies have “far-reaching consequences for the global economy and financial markets. “On balance, both pose downside risks,” adds the note from Charles Hall, Head of Research, Alexander Paterson, Head of Transport Research, and Kallum Pickering, Chief Economist.
Looking at both candidates’ policies, they believe that overall they “involve a series of anti-growth measures that – if enacted – could impair US economic performance and create risks for financial markets.” They go on: “While certain policy proposals could provide some upside for certain sectors, on balance, both candidates propose a series of anti-growth measures that – if enacted – could impair US economic performance.”
And so the saying goes, when the US sneezes, the world catches a cold. Hence it could impact economic growth around the world, including the UK. “The US remains the most systemically important global economy,” says Peel Hunt in its note. “As a result, a lurch to more radical policies would create major ripple effects across the globe and international financial markets. So far, we have only considered the initial effects of the candidates’ platforms. However, the ultimate result of many of these proposed policies – if enacted – would depend upon the reaction of other countries.”
One policy singled out is Mr Trump threat to impose tariffs on imported goods to the US. Among individual equities, Peel Hunt’s analysts singled out a number that could be impacted by such tariffs. They include Nottingham-based Games Workshop, with the US representing around 40% of its sales. “Trump tariffs on imports would affect the cost of goods into the US, but we would expect these to be passed on to consumers”, Peel Hunt said.
Another is upmarket drinks mixer maker Fevertree, with the US its largest region by revenue, generating 32% of group sales. Currently about 70% its products and made in the UK and imported to the US. “A 20% tariff on imports is likely to have a notable impact”, the note concluded.
Tariffs could also dent companies in the transportation sector. They include British Airways owner IAG, where Trans-Atlantic routes are “highly significant.” The notes goes on: “Tariffs may pose a significant problem for Ryanair and Wizz Air. “Currently, tariffs between the EU and US are suspended for large civil aircraft until 2026, which effectively exempts Airbus and Boeing airframes and engines made in either region. This suspension may end earlier under retaliatory tariffs.”
Jet fuel is priced in US dollars, so any negative currency reaction to the election result would push up airlines’ costs. More broadly, if Kamala Harris wins America’s corporate tax rate could jump. with implications on profits.
Oil and gas companies will also be closely watching the outcome of the election. As Peel Hunt says: “Decarbonisation policy has emerged as a top election issue in the US. “A Trump victory could lead to a loosening of climate targets, although even the Democrats may have to slim down their climate commitments given the fiscal and debt challenges that have become increasingly pronounced across major economies. This, in turn, could prolong the dominance of oil and gas in the energy mix, as the build-out of renewable energy and low-carbon alternatives may lag behind government targets.”
Defence firms could be among those impacted by whoever wins. It says: “Whilst both candidates plan to increase defence spending, Trump plans to reduce or eliminate assistance or Ukraine, which may have implications for global security.”
