As former US President Donald Trump closes in on a new term in the White House, the Republican candidate’s policies analysed by The Currency’s writers through the campaign are about to move centre-stage.

Writing from the US in mid-August, Siobhán Brett identified that “the supermarket aisle is where the public heartache continues to play out most”. American voters crippled by credit card debt and sky-high grocery prices were receptive to Trump’s message on “Kamala’s inflation nightmare,” she noted.

Microeconomics appears to be where the Republican has won the election, leveraging his Democratic opponent Kamala Harris’s participation in the outgoing administration. How Trump proposes to put money back in American’s pockets is the part where the world needs to take notice. 

Also in mid-August, Peter Kinsella began to explore the likely impact of a second Trump presidency, starting with deregulation. This includes promises to increase US oil production, which would contribute to a period of lower oil prices across the world. 

Peter also predicted that a Trump presidency, with former venture capital investor JD Vance as vice president, would trigger a “bonfire of regulations” with unexpected consequences on multiple industries.

In the fiscal arena, Trump’s plans to cut domestic taxes and replace them (in part) with US import tariffs are set to play havoc with global markets. 

Domestically, Trump’s fiscal plans “are anticipated to add at least $5.8 trillion to the US debt load. In practical terms, it means that the annual fiscal deficit will be at least 6.5 per cent of US GDP,” Peter wrote last month. “When you add this to the current account deficit of 3.5 per cent of GDP, it means that the US twin deficit is on track to breach levels of 10 per cent of GDP. This is an astonishing deficit to run outside of wartime and it is a real source of vulnerability for the US dollar, particularly as the Fed starts to cut rates.”

This dollar weakness may be offset initially by the effect of tariffs, which the Republican candidate has suggested should be 60 per cent on Chinese goods and 10 per cent on imports from Europe. But Peter’s view is that these would be opening positions for renegotiations of the terms of trade between the US and the rest of the world, to be reduced in exchange for better access for US exports over time.

“So, we can expect a modest bounce for the dollar after the election. However, I strongly doubt that it will be sustained. The dollar’s already lofty valuation profile suggests that incremental appreciation will be hard to maintain,” he wrote. The USD/EUR exchange rate appreciated by 1.6 per cent in the small hours of Wednesday morning when Trump’s victory became apparent.

A similar bump was recorded in 10-year US treasury yields as bond markets prepared for the twin effects of economic growth and continued inflation under Trump’s policies.

“An EU-US trade war would be extremely harmful for Ireland and for Europe as a whole.”

The promise of tariffs of around 20 per cent on average poses the most immediate economic risk to Europe, including Ireland. Concluding a recent series of articles on Irish companies exploring the opportunities opened by recent trade deals, Jonathan Keane noted that this era was coming to an end, especially in the case of a Trump presidency.

“The former president has not been shy about pursuing a protectionist agenda and has made grand statements about applying tariffs of up to 20 per cent on pretty much everything,” Jonathan wrote. “The scuttlebutt among EU officials is that the European Commission has prepared a list of industries and goods it could retaliate against should Trump follow through on his promises. There’s no two ways about it, an EU-US trade war would be extremely harmful for Ireland and for Europe as a whole.”

The combined effects of a proposed reduced federal corporation tax rate for companies making goods in America and tariffs on imports could pose a particular challenge to those US pharmaceutical groups that have established manufacturing bases in Ireland.

With US multinationals and their employees forming Ireland’s main source of tax revenue, I examined the prospect of evolving American tax policies on foreign direct investment here on Monday, along with its corporation tax contribution to the Exchequer.

The consensus among transatlantic tax practitioners is that it will take a few months for the dust to settle and new officials to be appointed before the Trump administration’s approach to key provisions becomes clearer.

The Trump campaign has explicitly promised to extend the rules he introduced in the 2017 Tax Cuts and Jobs Act (TCJA), including tax breaks for multinationals exporting products and services based on high-value intellectual property. The TCJA has encouraged the adoption of the so-called green jersey structures behind the surge in Irish corporation tax revenue, but its provisions are scheduled to expire gradually from the end of 2025.

Congressional uncertainty

There is, however, still uncertainty about a Trump White House’s ability to carry out such decisions depending on the outcome of Congressional elections. The Republican Party appears to have won a Senate majority, but not the two-thirds threshold required to pass legislation without bipartisan support. 

The House of Representatives remains in the balance and the outcome of the election there will prove crucial to Trump’s freedom in amending tax law.

There is a more immediate risk in the prospect of retaliatory US taxation in situations where the upcoming implementation of global minimum tax provisions agreed at the OECD result in the American Treasury losing out revenue to countries like Ireland.

As it stands, the US has not fully implemented internationally agreed rules such as Pillar Two of the OECD agreement imposing a minimum, country-by-country 15 per cent corporation tax rate on the profits of multinationals. This, and unilateral action by other countries such as digital services taxes, could leave multinationals to pay tax overseas that would otherwise be due in the US and anger Republicans.

“They might actually look to use the tax code to retaliate against companies that are domiciled or headquartered in other jurisdictions, to the extent those jurisdictions are imposing and collecting those taxes under Pillar Two,” said Jeff Kummer, managing director of tax policy at Deloitte US.

In an interview with Tom Lyons last month, Trump’s former Secretary of Commerce Wilbur Ross downplayed the impact of his friend’s return to the White House when it comes to US direct investment in Ireland. “I think we are in a world where not just the US, but countries in general, are looking for new sources of revenue,” Ross said. “But I also think that at this stage, so much American investment has gone into Ireland that the real question is, would it be uprooted just by taxes?”

Ross also predicted a role for Elon Musk when jobs are allocated in the new Trump administration. There is a “functional relationship” built on “mutual respect” between the Tesla founder and the property tycoon-turned-president, he told Tom.

In the meantime, John Looby has urged investors to refrain from making knee-jerk portfolio decisions on the back of developing election results.

“Thinking of the stock market as a series of binary bets to which we can attach probabilities is unhelpful – and potentially costly. Crucially, even knowing the outcome of a given event might cost us money,” he wrote. “As investors, on election night of the Trump/Harris tussle, while we should certainly tune in to enjoy the drama, we should do our very best to ignore it.”