We all know that major changes in a country’s policy necessarily affect the industrial sector. In this case, much more, since President Donald Trump promised during his campaign (and is already taking actions on this matter) to make structural changes in the US industry. Regardless of your position, it is very important to be aware of what could happen, to make preventive decisions regarding your supply chain and your logistics in general, which could save you thousands (or even millions) of dollars.
Some companies will benefit from the tighter regulations and Trump’s pledge to focus on job creation in the US, while others will be worse off by more protectionist trade measures. The automotive industry is one of the most affected because one of the economic challenges posed by Trump is to impose rates of between 35% and 45% for imported products from China and Mexico. This decision has a direct impact on organizations like Ford, Volkswagen, Audi, Toyota, Nissan, BMW or General Motors, since this group of large automotive companies has a common denominator in Mexico in terms of their economic growth.
This statement blew up all the alarms in the American automotive sector first, and then worldwide, as Mexico is the seventh automotive manufacturer in the world. Two years ago, this country produced more than 3.56 million vehicles and it is expected to exceed 5 million by the end of this decade. For this reason, all major automotive groups are or will be present in Mexico. Firms such as BMW, for example, are currently building their plants in Mexico, as they need an open trade. After all, these industries depend on imports and exports, and the US market is essential to them.
When it comes to Ford, Trump’s plans will make it harder to this great company, as well as to all the automakers of Detroit. Ford is at the forefront of the attacks launched by the new president. The case of BMW is no different since Trump has advised this company that if they intend to build a factory in Mexico and then sell cars in the United States, import charges will be very high. He repeatedly promised during his campaign a 30% charge penalty for Mexican-made cars that hit the US market. The president has said that he knows that the German automotive industry is important for his country, but he affirms that it is preferable for such companies to build their factories in the US.
Read also: 2017, supply chain and technology, by David Kiger
The investment community even sold US securities and instruments in bulk to put their funds in less susceptible investments to international events, such as precious metals and stable currencies. Shares of Japanese manufacturers, which also produce large parts of their units for the US market in Mexico fell more strongly than the Nikkei index, which has fallen by 5%. During the Election Day, the yen gained ground against the dollar for the first time in 4 years, and we can do expect a raise in the prices of auto parts from Japan.
What about other industries? Trump’s presidency could be good for the US corporate sector, as many companies will benefit from tighter regulations and his promises to concentrate job creation in the US. United State Steel, for example, never recovered from the financial crisis of 2008 and Trump may be its hope in an increasingly shrinking world market. According to the Department of Commerce, the producers are suffering from the liquidation of some types of steel, and they are about bankruptcy because of taxes on imports from many countries. Nevertheless, Trump has stated that he will do its utmost to protect the domestic production of the US. Peabody Energy, meanwhile, filed for bankruptcy in April last year, but its shares soared after Trump’s victory thanks to his opinion on climate change. His presidency will actually benefit US miners all over the globe.
Among the companies that have publicly expressed their disagreement with Trump’s vision of how to make America great again are Apple and Amazon. Among the Silicon Valley companies that Trump calls “problematic,” Apple is one of Trump’s main targets. The president has harshly criticized this big company for creating jobs in Asia instead of the US. If he imposes a 45% charge on Chinese imports, the price of iPhones, iPads and other products would simply skyrocket. And among the companies mentioned by Trump in its campaign, Amazon and its founder, Jeff Bezos, seem to occupy a preferred place in his list. The president has said that if Amazon were to pay taxes in the right proportion, its stocks would inevitably fall.
It is vital to be aware of what can happen in these early moments of the Trump administration. We’ll see what happens then.
Recommended: How a Trump presidency will affect 15 industries
* Featured Image courtesy of Matt A.J. at Flickr.com