Preparing for Trump: Global risk implications of a White House return

Next week, a new president will be elected to the White House as Americans head to the polls on November 5.

For the Democrats, current Vice President Kamala Harris will be aiming to become the first female US President. For the Republicans, Donald Trump will be looking to return after his first term between 2017 and 2021. Polls at the time of writing suggest a coin-toss on who will win.

“One might argue that a further Trump presidency is the greatest threat we face to innovation and global stability,” said Julia Graham, Airmic CEO, when discussing the top threats facing UK risk professionals in 2024 back in March.

At the start of the year, Control Risks said the US election will be the biggest geopolitical event in 2024, with ripple effects felt across the world.

The US election is like no other. Such is the influence of the superpower, it significantly impacts international trade, financial markets, and geopolitical dynamics. The election result can lead to shifts in trade policies and economic strategies, affecting supply chains and market stability.

“One might argue that a further Trump presidency is the greatest threat we face to innovation and global stability,”

Changes in US foreign policy can also influence security risks and diplomatic relations worldwide. Moreover, the election serves as an indicator of broader trends in governance and populism, which can affect political stability in other nations.

While the appointment of Harris seems to indicate a continuation of her work with current US President, Joe Biden, Trump’s return provides a wild card element to proceedings.

So what exactly might his return mean for global risk managers?

Trump’s first term in office

Perhaps a good place to start with what a second Trump term may look like is to review his first spell in the Oval Office.

Trump’s first term was marked by significant policy shifts and a unique approach to leadership that reshaped both domestic and international landscapes. His administration adopted an “America First” stance, prioritising US interests in trade, immigration, and foreign relations. This approach often resulted in confrontational rhetoric, particularly towards long-standing allies and international organisations.

One of the hallmark features of Trump’s presidency was his aggressive stance on trade. He imposed tariffs on a wide range of goods, particularly targeting China, which he accused of unfair trade practices. This led to a tit-for-tat trade war, resulting in increased costs for American consumers and businesses reliant on imported goods. While Trump argued that these measures were necessary to protect American jobs, the long-term consequences of such policies raised concerns about supply chain disruptions and inflationary pressures.

Trump’s administration also focused on deregulation, aiming to reduce the burden of federal regulations on businesses. This was particularly evident in the energy sector, where he rolled back environmental protections to promote fossil fuel production. Proponents argued that these measures spurred economic growth and job creation, while critics pointed to the potential environmental risks and long-term sustainability concerns.

On the global stage, Trump’s approach to diplomacy was often unorthodox. He sought to forge personal relationships with authoritarian leaders, including North Korea’s Kim Jong-un and Russia’s Vladimir Putin, while expressing scepticism towards traditional alliances like NATO. His withdrawal from the Paris Agreement and the Iran nuclear deal underscored his willingness to abandon multilateral agreements, raising questions about the future of international cooperation.

This time round: Economic uncertainty and stock market volatility

So what can global risk managers expect this time?

Some have suggested that Trump is cutting a more reflexed, and less aggressive, figure this time round. However, this will be Trump’s last spell as a US President — at least based on current US policies which rule that presidents can only serve two terms. This may embolden Trump to enact the most change possible before he steps aside.

While Trump’s first term was characterised by significant economic fluctuations, his return could trigger similar instability. His unorthodox approach to governance, particularly regarding economic policy, raises questions about the stability of financial markets.

“If he returns to office, businesses must brace for a potential resurgence of protectionist policies that could disrupt global supply chains and alter market dynamics”

During his presidency, Trump frequently employed social media to announce policy changes or intentions, often leading to immediate market reactions. Investors, wary of his unpredictable style, may experience heightened anxiety, resulting in market volatility.

Moreover, Trump’s stance on international trade could further complicate matters. His administration’s emphasis on “America First” principles often translated into tariffs and trade barriers, particularly against China. If he returns to office, businesses must brace for a potential resurgence of protectionist policies that could disrupt global supply chains and alter market dynamics.

Geopolitical tensions and global relations

A second Trump presidency could exacerbate existing geopolitical tensions. His confrontational approach to foreign policy, particularly regarding China and Russia, has the potential to reshape alliances and create friction between nations. During his first term, Trump often favoured unilateral actions over multilateral agreements, raising concerns about the future of international diplomacy.

Countries may need to recalibrate their foreign policies in anticipation of Trump’s return. For instance, nations that have relied on the United States for support in regional conflicts may find themselves navigating a more unpredictable landscape. For example, on Oct. 15, in an interview with the Economic Club of Chicago and Bloomberg News, Trump discussed South Korea.

While South Korea currently pays the US for the presence of about 28,500 American troops in the country — there as a deterrent to North Korea and ready to be deployed if war breaks out between the two Koreas. Trump described South Korea as a “money machine” and said: “If I were there [in the White House] now, they’d be paying us $10 billion a year. And you know what? They’d be happy to do it.”

The implications for global security are significant, as allies and adversaries alike assess how to respond to a more isolationist and transactional US foreign policy.

Supply chain disruptions

Trump’s policies have historically had a considerable impact on global supply chains, and his potential return could introduce new challenges for businesses reliant on international networks. The threat of tariffs and trade restrictions may force companies to rethink their sourcing strategies, leading to increased costs and operational disruptions.

A report by the Economist Intelligence Unit, titled ‘Trump Risk Index: the global impact of a new US presidency,’ says on the topic of higher tariffs and trade restrictions, “we think that Mr Trump would follow through on his stated intention to impose a blanket tariff on US imports; he has proposed a 10% flat rate, although we believe that this would ultimately be watered down. Additional punitive measures on politically sensitive imports like steel would be likely.”

Risk managers should proactively evaluate their supply chains and consider diversifying their sources to mitigate risks associated with potential trade barriers. Engaging with local suppliers or exploring alternative markets may provide a buffer against uncertainties stemming from Trump’s policies.

Additionally, companies should stay informed about any legislative changes that may affect trade relations and supply chain dynamics.

Regulatory changes and business environment

Trump’s first term saw significant deregulation across various industries, from environmental protections to financial oversight. If he returns to the White House, businesses may need to brace for further regulatory rollbacks, which could create both opportunities and challenges. While reduced regulations might spur growth for some industries, others may face heightened scrutiny or changes that could disrupt their operations.

For example, companies in the energy sector may benefit from less stringent environmental regulations, while those in health care may find themselves navigating a more chaotic regulatory environment. Businesses should conduct thorough risk assessments to identify how potential regulatory changes could impact their operations, ensuring they remain adaptable to the evolving landscape.

Public sentiment and social risks

Trump’s polarising presidency ignited significant social and political divisions in the United States, and his return could amplify these tensions on a global scale. Risk managers should recognise the potential for social unrest and the reputational risks associated with operating in a politically charged environment.

Engaging in proactive communication strategies and fostering a culture of inclusivity can help organisations mitigate social risks. Companies should consider how their messaging aligns with public sentiment and be prepared to respond to emerging social movements. A failure to address these issues could lead to significant reputational damage and loss of consumer trust.

“The risks around the United States election include the potential for civil disturbance,” said Sam Wilkin, Director of Political risk analytics, financial solutions at WTW, at a press briefing held by Airmic at its annual conference in Edinburgh in June. “The French have a reputation for targeting business interruption when they participate in civil disturbances but, in the US, when we riot it tends to be major property damage,” he added.

Preparing for the unexpected

While many businesses are keenly aware of the potential risks associated with a Trump presidency, it is essential to acknowledge the unpredictable nature of politics. His first term was marked by unexpected policy shifts and reactions that left many unprepared. Therefore, organisations should adopt a flexible risk management strategy that allows them to respond swiftly to changing circumstances.

Developing contingency plans and scenario analyses can help businesses navigate the uncertainty surrounding a potential Trump return. By evaluating various outcomes and their implications, organisations can position themselves to respond effectively, minimising potential disruptions.