Trump Trade 2024: Understanding Market Trends and Strategies Under Trump’s Economic Policies

With Donald Trump once again running for president, many of his economic policies and views on international trade are coming back into the spotlight. His particular brand of aggressive protectionism, deregulation, and lower taxation has been dubbed the “Trump Trade”’ by the media.  

That’s a catchy name, but it’s not just for show. During his stint as President, Trump’s policies produced mixed results. While selected economic sectors benefited, employment and healthcare worsened, and the budget deficit widened ^[1]. 

And now, with the very real prospect of Trump returning to the White House, we could see Trump Trade 2.0 taking the stage. Should this happen, how would this impact the economy, and what should investors do to get ready? 

Key Points 

• The Trump Trade refers to Trump’s economic strategy of lower taxes, deregulation, and higher tariffs to stimulate US growth. 

• Trump’s policies benefited specific sectors like finance and energy but increased the federal deficit and triggered trade wars. 

• If re-elected, Trump’s policies could favour the stock market and select industries but pose risks like higher inflation and retaliatory tariffs. 

Understanding the Trump Trade  

The Trump Trade can be summed up as Donald Trump’s approach to stimulating growth in the US economy, focusing on less regulation, lower taxes, higher tariffs and lower immigration.  

The Trump Trade has been shown to benefit selected industries and sectors and can have downstream implications for inflation and bond yields ^[2].  

Highlights of the Trump Trade in 2016 to 2020 

A strong economy 

Under the Trump presidency, the US economy continued to remain strong with low inflation and good job growth. This continued until the onset of the Covid-19 pandemic, which drove up unemployment and inflation, resulting in Trump leaving office with fewer total jobs than when he entered it.  

Several academics have pointed out that the strength of the US economy was a continuation of the post-Great Recession economic expansion initiated by the Obama administration, which raised questions as to whether Trump should be fully credited for the strong economic performance. 

Job creation and wage growth ^[3] 

Up until the pandemic, the Trump presidency saw growth in jobs and wages, continuing on from an unbroken streak that began in the previous administration. Unemployment fell to 3.5% in 2019, its lowest level in 50 years. Meanwhile, wages increased in 2018 and 2019.  

Tax cuts 

The most visible and controversial of Trump’s policies was the Tax Cuts and Jobs Act, which was signed into law in 2018. This would represent the biggest tax overhaul in 30 years.  

While several reforms under the Act are slated to expire in 2025, the tax cuts have wide-ranging effects. Corporations benefited from a permanent tax rate reduction – from 35% to 21% ^[4]. Meanwhile, the Act affected income tax rates, standard deduction, personal exemption, health coverage mandate, tax credits and more for individual taxpayers.  

All told, the tax cuts seemed to have the intended impact. Studies show the legislation likely bolstered economic growth through increased capital investment in the private sector, while consumer spending strengthened as a result of higher after-tax income during the initial years the Act went into effect. 

Booming stock market 

With high employment, rising wages, tax cuts and an overall healthy economy, the stock market enjoyed a bullish few years. After an initial nosedive at the start of the pandemic, the S&P 500 went on to smash several records in a bull run that lasted until 2022. Similarly, the Dow Jones Industrial Average jumped 57% overall during Trump’s term ^[5].  

Annual deficit  

The economic boom under Trump’s watch came at a cost. The tax cuts, together with increased defence spending, caused a widening deficit in the federal budget.  

In 2018, the annual deficit stood at USD 779 billion. This spiked to USD 984 billion in 2018 and crossed the USD 1 trillion mark in 2020 ^[6].  

Trade tariffs 

Another hallmark of the Trump Trade is the implementation of trade tariffs, which was intended to buttress the American economy against foreign competition from cheap imports.  

The most famous example of this was the “trade war” with China, in which the Trump administration imposed several rounds of tariffs on steel, aluminium, washing machines, solar panels, and goods from China, affecting more than USD 380 billion worth of trade in total. 

China wasn’t the only trading partner affected. Other countries such as Canada, Mexico and the European Union also had trade tariffs raised against them.  

Trade tariffs are essentially a tax on goods imported from target countries. The intention is to raise the prices of such goods, so as to render similar goods produced in the US more competitive. The Trump administration also added that tariffs would benefit American workers, give the US leverage for future trade agreements, and protect national security.  

Hence, studies published in 2024 showed that the tariffs failed to have the desired impact. There were neither increases nor decreases in the number of jobs in the US linked to the various tariffs raised against several goods from China.  

Instead, Trump’s trade tariffs led to tariffs from other countries in retaliation, creating a negative impact on American workers and consumers.  

What to expect if the Trump Trade returns? 

If Trump returns to the White House, his economic policies could impact various sectors of the economy—here’s what to watch out for: 

Impact on the stock market ^[7] 

The stock market generally performs favourably during election periods, finishing with an average increase of 6.8%. This was seen to hold true regardless of which candidate won. 

This time around, there’s no reason to expect the stock market wouldn’t follow a similar trend. If Trump returns to the White House, he is expected to deliver on his campaign promises of reduced regulation, lower taxes and increased oil & gas production.  

In particular, Trump’s return will likely mean extending or eliminating the 2025 expiry of the Tax Cuts and Jobs Act. This means prolonging lowered taxes for all, a move which is expected to further boost capital investment in the private sector, promoting a stimulatory effect on the US economy.  

Based on these factors, we can expect the stock market to respond favourably to a Trump victory, both in the immediate term and possibly over the longer term as well.  

However, investors should bear in mind that the impact of individual candidates – and indeed, election results – generally do not move the needle much when it comes to the stock market. Rather, investors largely make their decisions based on economic fundamentals, so as long as the US economy remains strong, so will we see the stock market responding in kind.  

Impact on bond yields ^[8] 

Trump’s pro-business, de-regulatory policies, coupled with increased government spending, could do a good job at keeping the US economy chugging along. There’s also a chance that the economy could overheat, causing inflation to start rising again.  

As inflation rates are one of the few economic levers available to control inflation, a Trump win could see the Federal Reserve opting to keep interest rates high. This would give them more leeway to intervene should inflation rates reverse course and start trending upwards again. 

With interest rates remaining high, bond yields may increase as investors seek similar risk-free returns. This would cause a corresponding decline in bond prices. Accordingly, this could mean that a Trump presidency may see a more muted bond market.  

Impact on Dollar strength 

Like all fiat currencies, the strength of the US Dollar ultimately depends on the strength and outlook of the economy. With the Trump Trade forecast to keep the US economy doing well, the US Dollar can be expected to remain in good strength upon a Trump victory.  

External factors that contribute to the continued dominance of the Dollar include weakness in other global currencies, stemming from the eurozone’s slip into recession, and setbacks experienced by Japan and China.  

A strong Dollar will render American equities more attractive to investors, increasing the chances of greater fund inflows. Over the last two decades, a rise in the value of the U.S. dollar was positively correlated to the movement of the S&P 500 Index. About 40% of the time, the index goes up when the dollar’s value rises ^[9]. 

While a strong US Dollar may be helpful in driving up the stock market, its strength could also cause issues elsewhere. Notably, exporters who sell to overseas customers are likely to see their products costing more, eroding their competitiveness on the global stage. Companies who operate offshore could also see their profits drop when converting foreign currency revenue back to the Dollar.  

Impact on specific sectors ^[10] 

Financial services 

After Trump won the 2016 elections, the financial services sector significantly outperformed the overall market. While the S&P 500 rose just 3% following the election, the S&P Financials index advanced by more than 10%. 

The spike was driven by Trump’s pro-business, deregulatory stance, helping propel banks and financial institutions which benefited from loosened rules around capital requirements.  

Should he recapture the presidency, Trump is expected to continue paring back regulations, which could give financial providers more leeway to expand their operations, raise debt, and increase economic activity. The deregulatory environment will likely help the financial sector emerge as winners as a result.  

Technology  

The technology sector is expected to benefit from a Trump return to the White House, owing to the continuation of the Tax Cuts and Jobs Act that he is likely to implement.  

When the Act was first introduced in 2017, the massive reduction in corporate taxes from 35% to 21% meant that companies gained a 14% bonus on their balance sheets ^[11]. This was a huge boon for companies in the high-profit technology sector, leading to increased investment, stock buybacks and dividend payouts. 

Consequently, the technology sector stands to continue enjoying a lower tax environment that could help drive performance.  

Energy ^{[12, 13]} 

The US has well and truly become the largest oil producer in the world, in 2024, leading production volumes for the sixth year in a row. Trump has declared his intention to lean heavily into the country’s rich oil reserves – famously encapsulated in his “drill, baby, drill” catchphrase.  

As such, the energy sector – specifically, oil and gas producers – will likely benefit from friendlier policies as Trump seeks to advance domestic drilling. The increased access to oil will strengthen America’s energy self-reliance while cementing the country’s status as a key oil exporter.  

Additionally, the expansion of the oil and gas industry will see more jobs created, further propping up the performance of the sector while raising its status as an economic growth engine. 

Manufacturing ^[14] 

A resumption of the Trump Trade would likely see continued strength in the US Dollar, leading to less global competitiveness for American exporters and increased foreign exchange risks for companies that collect foreign revenue, as discussed earlier.  

On the positive side, another way the manufacturing sector could be affected is the increased prioritisation of the CHIPS and Science Act to improve US semiconductor production capacity and lessen reliance on overseas manufacturers.  

This could result in increased funding, tax breaks and other incentives to accelerate the development of the sector, paving the way for the sector to outperform in the near future.  

Infrastructure  

Infrastructure investment was one of the rare few issues that garnered bipartisan support. The Infrastructure Act, signed into law by Biden in 2021, provisions USD $1.2 trillion for infrastructure projects till 2026; to date, over USD $490 billion remains to be allocated ^[15].  

This is highly promising for the infrastructure sector, especially since Trump is widely expected to throw his support behind projects involving building and repairing roads, upgrading airports, and improving the nation’s ports and harbours.  

For this reason, companies specialising in construction, civil engineering and related services could benefit from a Trump second term. 

Global implications of the Trump Trade ^[16,17] 

Here are some key highlights to consider in the event of a Trump victory.  

Universal tariffs on all imports 

Trump wants to leverage the economic might of the US to elicit concessions from trading partners. He blames the global trading system for problems in the American economy including lost jobs, closed foreign markets and an overvalued dollar.  

However, when Trump enacted trade tariffs the last time he was in office, trading partners retaliated in kind. As such, imposing a universal trade tariff on all imports would likely see a higher degree of retaliation from most, if not all, trading partners.  

This could lead to serious consequences around the world, including lowered trade and global growth, supply chain disruptions, and higher prices for all. 

Renewed trade war with China 

The Republican candidate has threatened to step up the trade war with China, increasing tariffs to as high as 60%. This would not only hinder China’s recovery, but the fallout could spread to the greater global economy.  

This is because China is an important driver of global growth, and escalation of the US-China trade war is likely to increase inflation levels around the world, causing central banks to embark on a new round of interest rate hikes. As a result, macroeconomic uncertainty would deepen, eroding investor confidence and tamping down stock market returns.  

Conclusion: Stick to a balanced strategy  

Clearly, a return of the Trump Trade could bring about complex and far-reaching consequences, and it is difficult to predict which way things will turn out. Afterall, the strength and impact of policies don’t solely depend on who’s in the White House, and partisan factors will also play a role.  

We’ve covered a lot already, so we’ll wrap things up by saying this: The US Presidential Elections is an exciting time to look for trading opportunities but be careful not to overcommit based solely on the latest news headlines. Remember that things are moving quickly, and the market can change at a moment’s notice.  

Set aside a reasonable budget to make short-term bets as they come up but be sure to maintain your long-term strategies as well. Afterall, the election candidates come and go, but the market is still largely ruled by fundamental factors.  

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