If you didn’t already know that Donald Trump has been elected as the next president of the United States, you have probably been in isolation over the past 24 hours. While it came as a shock – almost every poll and survey before the election showed Hillary Clinton winning – it seems clear that today is the first day in a new US political chapter. What we need to acknowledge first is that Trump won’t officially become president until January 20, so it’s unlikely that he’s going to be able to do much in the next two months or so….
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If you didn’t already know that Donald Trump has been elected as the next president of the United States, you have probably been in isolation over the past 24 hours.
While it came as a shock – almost every poll and survey before the election showed Hillary Clinton winning – it seems clear that today is the first day in a new US political chapter.
What we need to acknowledge first is that Trump won’t officially become president until January 20, so it’s unlikely that he’s going to be able to do much in the next two months or so.
The big question will be whether Trump will follow through on his promises made during the election campaign. That includes among other things, a massive wall on the border of the United States and Mexico, branding China a currency manipulator and whacking tariffs on imported Chinese goods.
Trump has also promised to repeal Obamacare (similar to our Medicare), increase defence spending and charge foreign countries (like Japan and South Korea) for keeping US soldiers stationed there.
And then there’s his promise to deport all illegal immigrants (of which there are an estimated 11 million in the US), and block immigrants from a number of mostly-Muslim countries from entering the US.
He’s also said he would lower the corporate tax rate to 15% from its current level of 35% and reduce taxes for Americans as well.
When it comes to trade agreements, Trump plans to withdraw from the Trans-Pacific Partnership (TPP) – which Australia and 11 other countries have already signed up for. Mrs Clinton also opposed the TPP.
Whether he manages to get any of these policies through remains to be seen. His Republican Party do control both houses of Congress which will make it easier, but that doesn’t mean he’ll get everything his way.
But we shouldn’t underestimate Trump’s conviction and determination to push through all the policies that he is passionate about – even if they get watered down.
The consequences for Australia and Australian companies are difficult to determine at such an early stage. The TPP hadn’t yet been implemented, so we aren’t suddenly missing out.
Tariffs on Chinese products could be a huge blow for Australia – since most of our exports of resources like iron ore and coal go towards producing Chinese steel products. But yet again, we don’t know if Trump will be able to get that policy approved. It could start a trade war with China, which might be catastrophic for world trade and could see the world’s economies fall into a global recession.
No matter what happens, investing hasn’t suddenly changed. Foolish investors still need to buy high quality stocks at cheap/good prices, hold for the long term and reinvest into the market on a regular basis. It also pays to remember that we’ll still be using our mobiles phones and the internet, buying groceries and using electrical appliances not to mention driving cars and going to work.
It’s not hard to imagine a very limited impact on companies like Woolworths Limited (ASX: WOW), Wesfarmers Ltd (ASX: WES), Telstra Corporation Ltd (ASX: TLS), TPG Telecom Ltd (ASX: TPM), Origin Energy Ltd (ASX: ORG) and AGL Energy Ltd (ASX: AGL).
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The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.