Harry Geels: Five consequences of Trump's victory

November 12, 2024

^{This column was originally written in Dutch. This is an English translation.}

By Harry Geels, written in a personal capacity

Donald Trump's re-election was headline news last week. We do not know exactly how his policies will play out in practice, but there seem to be five main themes: deregulation and tax cuts, more freedom (of speech), geopolitical deal politics, stricter immigration policies and a further advancing corporatocracy.

The US election is no exception to what is happening elsewhere in the West. Large sections of society want change and Donald Trump had a narrative for this and Kamala Harris did not. We can agree or disagree with that narrative, but that is flatly the analysis. That felt need for change has been driven by a combination of factors consisting of rising debt, bureaucratisation, inflation and immigration, complemented by geopolitical uncertainty over Russia and the Middle East.

If the Netherlands had had a similar electoral system to the US - and Geert Wilders had stood opposite Frans Timmermans, for example - Wilders would have won as much here as Trump. We see the appeal of a decisive leader who is going to bring about change all over the world. Think of Viktor Orbán in Hungary or Javier Milei in Argentina. Whether or not inflation or immigration will increase more, and over what period of time exactly, are nothing more than boring ‘facts’. The perception is that too many things are not going well, and ‘perception is reality’.

We can't change it for now. So let's focus on the main consequences. Briefly, those are five. My personal assessment of Trump's ‘Agenda 47’.

1) Deregulation and tax cuts

Trump's Agenda 47 focuses on reducing bureaucracy within the federal government. A key part of this is the reintroduction of ‘Schedule F,’ which allows many federal employees to be fired at will. This will make it easier to replace positions previously protected from political influence. He also aims to reduce the role of certain government agencies, such as the Department of Education, with the goal of more efficient and direct executive power.

Trump's Agenda 47 further includes tax cuts aimed primarily at the middle and working classes, as well as eliminating taxes on social security benefits to ease the financial burden on retirees. He has proposed further deductions for families and businesses to stimulate economic growth, in addition to tax incentives aimed at moving production (to the US) and reducing dependence on foreign production.

2) More freedom (of speech)

Agenda 47 deals extensively with freedom of speech and limiting the influence of government agencies on social media platforms. Trump claims that agencies like the FBI are pressuring tech companies to censor certain views, especially conservative ones, and has promised to limit such government influence. His agenda suggests changes to Section 230 of the Communications Decency Act, giving tech companies less legal protection and making content less moderated.

In addition, Trump has expressed support for figures like Elon Musk, who advocates an absolutist approach to free speech, suggesting Musk's management of X as a model for less restricted online discussions. Trump's opponents worry that increased control over federal agencies under Agenda 47 could centralise power in ways that negatively affect neutrality, while proponents argue that it actually protects diverse expression from unwarranted censorship.

3) Geopolitical deal politics

Furthermore, Trump boasts that no US military personnel were killed during his first term at all. He wants to end the war in Ukraine as soon as possible. He is probably going to try to do that with a deal, for example by getting Ukraine to cede Crimea and the Donbas to Russia in exchange for peace and Ukraine's admission to NATO. So there seems to be no reserve to make deals with dictators such as Vladiminir Putin and Xi Jinping. Trump continues to support Israel. The Middle East will therefore remain a problem.

4) Tighter immigration policy

Trump wants to close the borders to immigrants and deport the approximately 11 million illegal immigrants in the United States. This requires extensive organisation, partly because children born in the US are automatically eligible for US citizenship. There are also complications in the labour market, which is already tight and heavily dependent on this group of workers. It may therefore come at the expense of economic growth. A stricter immigration policy has advantages and disadvantages, and some things are easier said than done.

5) Advancing corporatocracy

For investors, Trump's policies - besides less taxes and regulations - are likely to be mostly pro-business. He wants less stringent anti-competition oversight. That means more mergers and acquisitions, which in turn leads to bigger companies and higher share prices, including for private equity. Except perhaps for Big Pharma, which is a thorn in Trump's side because he believes this sector is corrupted by its collaboration with all kinds of government agencies and its allegedly high healthcare costs for ordinary Americans. Robert F. Kennedy Jr. may play a role here.

To conclude, three comments

All in all, Trump's policies are the proverbial ‘mixed bag’, which on balance seem good for equities and less clear for bonds. For the latter, the question is what interest rates will do. On balance, Trump's policies seem to be raising interest rates because he is pushing for more growth. On the other hand, he will try to increase his influence on the central bank to keep interest rates down. The latter is needed to reduce dollar strength. Because that too will be an issue, especially vis-ả-vis China, to keep US business competitive.

Furthermore, sustainability is a concern. On the one hand, Trump seems fully committed to more fossil energy, while on the other he wants more innovation by promoting ‘freedom cities’ on federal land, which should stimulate technological growth and economic opportunities. Sustainability could then also be an opportunity, but left to the market, and less to supranationally imposed agendas. Do not forget that there is also an undercurrent of sustainability in the US, for instance coming from certain consumers and asset managers.

Finally, Trump's deregulation, tax cuts, pro-business policies and less reliance on supranational organisations will not leave the rest of the world, and specifically Europe, untouched. Europe - to avoid falling further behind economically - will have to go along with these policies. Trump's election evokes memories of Ronald Reagan's election in the early 1980s. Reaganomics was then followed up in Europe too, led by Margaret Thatcher. The big question, then, is how the EU will ‘handle’ Trump.

This article contains a personal opinion by Harry Geels

More columns by Harry Geels