Don’t go out and buy Air Canada stock just because Donald Trump was elected; the initial reaction is not too dissimilar from that following the elections of Ronald Reagan and George W. Bush. Although many liberals were unhappy with their electoral success, the aftermath was far short of the predicted apocalypse. Given Donald Trump’s record, expect that he, too, will prove more moderate than his pre-election stance, particularly as the realities of presidential power become more apparent.
Markets are now in turmoil, from the Mexican peso to the Japanese Nikkei index, but there will almost certainly be a bounceback as people calm down. (Breath, just breathe, to quote Anna Nalick.) Which doesn’t mean there won’t be negative economic repercussions, just that investors should be careful with their initial reactions.
This shift has a long history in American politics. Kennedy’s “missile gap” warnings vanished post-election, as intelligence showed it was illusory. Carter’s promise to pull U.S. troops out of Korea was abandoned as he came to realize the difficulties this would create. And Obama found that closing Guantanomo was much harder for the president to accomplish. Although Donald Trump might not go so far as Huey Long, who, on breaking his campaign promises said of the voters, “Tell them I lied,” he will probably make only token efforts to fulfill his more extreme pledges.
First, don’t expect him to move on many of his promises, like restoring coal jobs. Like many previous candidates, once in office reality will set in and the fact that the president doesn’t determine energy markets will become abundantly clear and quickly. More likely, he’ll work with staff to provide some kind of assistance, such as job retraining (more money for community colleges!) and infrastructure jobs.
It also seems probable that some of his more bombastic promises, such as extreme vetting of Muslim visitors or bombing the s—t out of ISIS, which would upset the international situation, will be replaced with more rational, albeit possibly harsh, policies. Already adopting a more presidential pose, he could in coming days calm our trading partners and allies, stabilizing stock markets and hopefully avoiding a recession.
Next, while he will undoubtedly be more pro-development for petroleum, oil and gas prices are more important to that industry. Expediting pipeline construction would help, but the many political and legal challenges faced by builders should mean minimal impact from the White House’s stance. More access to federal lands would make conservatives happy, but the industry doesn’t lack for drilling sites, just money.
On climate change, abandoning the Paris Treaty would be primarily of symbolic importance, since implementation has always been the biggest obstacle. China’s announcement of a 19% increase in coal capacity over the next five years demonstrates just how little committed many of the signers are. Possibly, President Trump will try to reduce federal support for renewables, but since that would cause the loss of many jobs and Congress has already extended the Production Tax Credit for five years, it’s not clear that much will be done, or at least not very quickly.
Probably the biggest uncertainty concerns his threat to renegotiate existing trade deals such as NAFTA, which could result in enough economic uncertainty to tip the U.S., and the world, into recession.