Trading under Trump: assets and markets on the move

 

Trading under Trump: assets and markets on the move 

Donald Trump’s second term as US president has ushered in a fresh wave of volatility across multiple markets. Now that he has been sworn in, President Trump has hit the ground running with many executive orders, and even more verbal threats.

At Alpari we have rounded up some of the assets and markets that have already been affected by Trump’s presidency, as well as those that might be in the months and years to come. 

 

The effects of tariffs and trade wars 

First off, tariffs can be highly impactful - changing trade relationships between countries, affecting the industries that work with the goods in question and they might also lead to price increases for consumers.

As we have already seen from Trump’s first term as president, he’s not afraid to introduce some drastic tariffs. Having kicked off a trade war with China in 2018, with Biden retaining many of the tariffs that Trump introduced, Trump announced new tariffs on China at the start of February. 

As well as the tariffs on China which took effect 4 February, Trump has announced levies on Canada and Mexico which came into effect on March 4. He has also discussed introducing tariffs on the EU and the UK. The impact we might see from tariffs under Trump includes the effects of the retaliatory tariffs that countries may impose on the US.

Ford CEO Jim Farley has warned that the 25% tariffs on Canada and Mexico could “blow a hole” in the US auto industry. US automotive companies are already feeling the effects of the new arrangement with China. The price to import cars they manufacture in China will increase, meaning that US automakers might raise their prices. The tariffs Trump has announced of 25% on steel and aluminum imports may also affect these companies and therefore their stocks. 

The semiconductor industry may also be hit by tariffs, with Trump having previously promised to impose 100% tariffs on Taiwanese made semiconductors. A study by the US International Trade Commission said that any disruption to semiconductor manufacturing in Taiwan could cause prices to soar for chips by as much as 59%. 

Retail and consumer goods businesses might also lose value on the stock market, due to a rise in import costs on Chinese products. Restrictions on Chinese technology firms could also affect global tech supply chains. 

As well as stocks there are also commodities to consider. Trump’s trade war with China in 2018 affected the prices of agricultural commodities like soybean, with China being one of the biggest importers of this product from the US. It’s possible agricultural commodities will be affected again in Trump’s second presidency. 

Oil might be a key commodity to watch during the coming months. 60% of crude oil imported into the U.S. comes from Canada, and China has also introduced a 10% tariff on imported US oil. 

On February 26, the president signed an executive order calling for an investigation into copper imports, which will explore whether tariffs could increase domestic production. The order calls for the report to be submitted within the next 270 days. This means that it may be some months before any effect on the price of copper (or on relationships with countries that export copper to the US) might be seen. However, the same day as Trump’s executive order, copper futures prices jumped 3%, which might suggest that traders are watching carefully for any movement on this. 

Tariffs may also have an impact on the Forex market. So far, the delays to Trump’s tariffs have actually weakened the US dollar. We might see USD strengthening against CNY, CAD, MXN, EUR, and GBP in particular given that these currencies’ countries have been hit by levies or highlighted by Trump as targets going forward. 

 

Crypto and other assets that might rise 

Crypto has been a key theme for Donald Trump, with his enthusiastic support of bitcoin instrumental in the token reaching new record prices, with Bitcoin flirting with the $110,000 level back in January. The new SEC chair David Sacks has shared that he is currently looking into the possibility of building a taxpayer-funded bitcoin reserve, which Trump has also recently announced he will be creating - some think that if the US starts buying the tokens for the reserve this might push the price even higher. 

The industry has been left waiting on more concrete details on Trump’s crypto policies. With fears growing around the potential economic damage from President Trump’s tariffs, cryptos plummeted in late February.

However, once the industry can regain confidence that Trump’s pro-crypto policies are imminent, prices may rebound swiftly. Also, crypto related stocks like Coinbase and Strategy (formerly MicroStrategy) might ride the wave too, if bitcoin and other cryptocurrencies rise in price. 

In terms of commodities, gold has seen massive increases in price recently, leading to speculation that it would soon breach the $3k mark. While it has since dropped away somewhat, there are still numerous factors that have led to its price increase which still apply right now. Trump’s executive orders provide the kind of geopolitical uncertainty that attracts investors to safe haven assets like gold. Global central banks are also bolstering their gold reserves in order to reduce their reliance on the US dollar, particularly Russia and China.

 Lastly, the financial sector might see a boost under Donald Trump - Republican presidents typically introduce tax cuts and deregulation, leading to increased profits for financial institutions. Trump has recently criticized the Federal Reserve, attacking the US central bank for not lowering interest rates as much as he wished. While the central bank is supposed to remain independent from the government, it has already received some orders from the president.  Trump’s policies are also predicted to encourage mergers and acquisitions that may lead to the consolidation of banks, if deregulation makes it easier for banks to merge. 

 

Assets that might drop

There are also assets that might drop based on Trump’s actions during his second presidency. 

Trump is famously a big advocate of oil and natural gas, declaring his intention to “drill, baby, drill”, increasing production in the US. However, his support for oil might actually lessen market value by leading to falling prices in a global market that is already over supplied.  

Trump’s deportation policies might affect industries that rely heavily on a workforce that is largely made up of immigrants, such as agriculture, restaurants and construction - companies in these industries might see their stocks fall. The effect of these deportations, in concert with other policies including tariffs, might even contribute to a recession, according to some economists.

Renewable energy stocks might take a hit based on the president’s promise to halt federal support for clean energy. Trump has also halted permission for new wind energy projects, potentially slowing growth in the sector. On the other hand, some analysts say that the cost-effectiveness of energy sources like solar and wind mean that utility providers might continue to turn to these sources over fossil fuels - especially with rising demand for electricity thanks to the boom in AI data centers. 

 

Conclusion 

Traders may choose to diversify their portfolio and keep an alert eye on these industries, markets and assets, especially when new tariffs are announced. Long-term implications include the effect of Trump’s trade policies on future administrations’ - for instance, Biden retained a number of Trump’s tariffs. We might also see an effect on the economic competitiveness of the US on the global market, as well as trade realignments and supply chain shifts in the years to come.

 

Donald Trump Trade War Stock Market crypto forex Oil Gold tech stocks Renewable Energy Financial Sector