The surprising outcome of the U.S. presidential election seems to be the latest step in a longstanding global trend of increasing political uncertainty and growing populism. Donald Trump’s election as the 45th American President has left a deeply divided country and displayed a deep and widespread anti-establishment sentiment among American voters. It underscores the discontent of those increasingly beset by rising income inequality, economic globalization, financial liberalization, technological innovation and societal shifts, including large-scale migration. These are in no way limited to the U.S. but are also visible in several European countries, most notably the UK, where it was identified as a major driving force behind Brexit. It could give political tailwind to populists elsewhere and is likely to influence upcoming elections in the Netherlands, France and Germany where right-wing parties are gaining traction.
As it will take some time before the new administration’s real policy agenda becomes clear, it is still too early to gauge the full implications of Trump’s victory and expectations about his future policy course remain highly speculative. It remains to be seen to what extent Trump will and can stick to his radical campaign rhetoric, given that he will be faced with the constraining powers of Congress, the federal juggernaut, and the courts. Even though the secured Republican majorities in the House of Representatives and the Senate could leave the new president with somewhat weaker checks and balances, he still needs the support of a deeply divided Republican party. However, on matters of foreign policy and trade, as commander-in-chief, the president has more freedom for unilateral action. It also remains to be seen how Trump the president will differ from Trump the candidate. The relatively conciliatory tone in his victory speech would seem to point to a more tempered and tame perspective, although one should remain cautious about developing premature hopes.
Though it is currently difficult to develop concrete predictions, the economic and political landscape is palpably different and it appears clear that policies will change. By virtue of the fact that nearly half of the Americans who voted, voted for change, Trump will not simply return to “business as usual”, but will reverse directions on many policies. His policy platform - while still lacking details – contains controversial pledges that could have costly economic impacts, fuel political volatility and adversely affect America’s sustainability profile with global repercussions. Moreover, his economic plans are sometimes contradictory where, on the one hand, he promises a wave of tax cuts while, on the other, advocates large spending increases on infrastructure and defense.
Mr. Trump’s skepticism of international free trade could initiate a new era of protectionism and negatively impact some key trading partners, specifically China and Mexico. Adverse social and environmental effects could result from Trump’s pledges to restrict immigration, deport illegal immigrants, repeal Obamacare, ease environmental regulations and cancel the Paris climate deal, all of which would sooner or later affect the U.S.’ country sustainability profile (currently ranked 15th in the RobecoSAM ESG country ranking with a score of 6.97 on a scale from 1-10). This political brief outlines some of Trump’s key policy pledges and focuses on their potential impact on various ESG criteria as summarized in the table below. Though not the subject of this analysis, the effects on financial markets and the global economy should not be ignored.
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