The election of Donald Trump has once again sparked questions for Australian iron ore shares like Fortescue Metals Group Ltd (ASX: FMG).
With Trump signalling potential tariffs on Chinese imports, some experts say Australian iron ore stocks could face some headwinds.
Meanwhile, Fortescue's chair, Andrew 'Twiggy' Forrest, is more optimistic about the situation.
The question is whether Mr Forrest can see the wood from the trees and is simply not talking about his own book. Let's see what the experts think.
How could the election outcome impact Fortescue shares?
It's important to first state that whilst opinions and facts are welcomed, none of us have a crystal ball to cast prophecies about investment opportunities.
We mere mortals have to go by logic, reasoning, and good old solid data.
Former chairman of the ASX Maurice Newman has shared his logic around the election outcome, what it means for iron ore shares, and Australia in general.
Newman says that Trump's proposed tariffs on Chinese goods, possibly reaching up to 60%, could strain China's economy—an essential market for Australia's iron ore exports.
He also says that if China's growth falters due to US-imposed trade barriers, iron ore demand may take a hit, placing Australian iron majors in a challenging position. According to The Australian:
China is likely to suffer economically under a Trump presidency at a time when its economy is already facing serious structural imbalances.
This will seriously impact Australia's iron ore and coal exports, not to mention state and federal budgets.
For reference, Australia's state and federal budgets are tied closely to mining revenues because Fortescue, along with other producers, each pays mining royalties to the government.
While the criticism is noted, Newman was scathing of Trump on a number of unrelated issues, ranging from climate change to "DEI", otherwise known as diversity, equity and inclusion.
Newman said Trump "believes in deregulation" and that he "does not support DEI…as a major corporate objective." I'm not sure these have anything to do with iron ore or Fortescue shares.
Twiggy remains bullish
In the same breath, Twiggy Forrest, Fortescue's chairman, remains optimistic. Forrest believes that China's economic resilience will withstand potential US tariffs.
The mining billionaire is confident that Australia's resource ties with China will endure. This is regardless of US policies. Per The Australian:
The amount of horsepower in the tank of China's economy and the ability to self-stimulate is phenomenal. You've seen just the edge of it.
The biggest trading partner the US has ever and will ever have is China. Let's not forget that they butter each other's bread.
Foolish takeaway
Fortescue shares remain a pivotal part of the ASX landscape, particularly with Australia's deep reliance on Chinese trade.
Whether or not Trump's policies will impact iron ore majors in Australia is a matter for debate. Plenty of pundits say they will, and plenty say they won't.
What's important is that an outcome has been reached. In October, UBS rated Fortescue a sell with a $17.60 price target.
