Note: KSG assesses that the election result is unlikely to alter KSG’s last assessment. This is an extremely brief situation report on the effects of a Trump win, as KSG will release a more detailed analysis on its wargaming and human intelligence collection in mid-January when the effects of a Trump Administration are clearer.
Key Points:
Donald Trump wins the US presidential election; Republicans are highly likely to retain the House and have gained control of the senate.
A US reduction in support for Ukraine is expected to strain relations with key allies like Germany.
Increased tariffs on Mexico and China are likely. These policies could open trade opportunities for US allies like Canada and Japan.
Trump is expected to prioritise support for US tech firms that compete with China while possibly side-lining non-US companies like TSMC.
Donald Trump Wins
Donald Trump has received enough electoral votes to win the US presidential election. The Republicans are also highly likely to retain control of the House, and Republicans have flipped control of the Senate.
Looking Forward
Russia-Ukraine
KSG expects The US will withdraw military support for Ukraine by at least 50% in the first 6 months of the Trump Administration (60% likelihood). This is likely to strongly compel a peace agreement where Ukraine cedes territory, but will likely ensure greater European involvement to maintain Ukraine’s resistance in advance of an eventual agreement. KSG assesses that this will likely increase friction between the US and EU (particularly Germany) as US-EU trade and/or political disputes may also emerge.
EU
KSG expects trade and political tensions between the US and EU to increase because of potential US tariffs across imported goods (55% likelihood).
Mexico
The US is likely to increase tariffs on Mexico (55% likelihood), and to restrict cross-border movement significantly (90% likelihood). Trade and positive relations between the US and Mexico are likely to decrease, creating opportunities for Canada, Japan, and Europe to increase trade with the US.
China
The US is likely to increase tariffs on China substantially (65% likelihood). In response, China will likely attempt to increase trade with Mexico, which is likely to have comparatively lower trade tariffs. As a result, relations between the US and Mexico are likely to strain even further. Moreover, the US could also threaten sanctions against Mexican companies and shipping companies trading with China.
Technology Sector
KSG consultation concluded that one of Trump’s biggest influences will be on US technology companies. Companies like Tesla are expected to receive indirect & direct US government support, as Elon Musk played a role in Trump’s re-election campaign. Moreover, US companies providing competitive advantages against China, like Intel, are likely to continue to receive US government support. Foreign technology companies like TSMC are likely to see their preferential treatment by the US government reduce. However, Trump is unlikely to seek significant damage to TSMC’s market share, as the US is still reliant on the company for chips. Overall, with significant Republican power in Congress, US companies (and potentially some Japanese and Korean technology companies), are expected to benefit at the expense of Chinese companies.
Cryptocurrencies
Similarly, KSG assesses that cryptocurrencies are likely to receive increased support from the US government under Trump. Cryptocurrencies are likely to become more institutionalised in the US financial system, which will likely establish new positive trade relations between the US and overseas centres of cryptocurrency.
Environment Legislation
KSG assesses that US-based oil and gas companies are highly likely to see environmental protections and emissions standards set by the Biden administration significantly reduced. Relatedly, KSG assesses that ‘green energy’ companies are likely to see their support from the government decrease. However, as KSG reported previously, US companies connected to mineral competition against China may be exempt or less affected by this trend.
Finance Deregulation
KSG assesses that Trump is likely to decrease regulations for US banks (90% likelihood). Trump has also suggested he will reduce the independence of the federal reserve (70% likelihood).
Israel-Palestine
KSG assesses that Trump will quickly seek to bolster ties between the US and Israel, and KSG expects US direct military support to Israel to increase or at least remain stable (90% likelihood). Energy companies and their assets are likely to be indirectly protected by a firmer US commitment to regional security.