Donald Trump’s victory in the US election sent shockwaves through industries that rely on open trade, from airlines to cars and IT outsourcing, even though many executives remain unsure what his protectionist rhetoric will mean in practice.
Throughout his presidential campaign, Trump has vowed to revive the US economy by slashing taxes, preventing companies from making products overseas, renegotiating trade accords and imposing tariffs on imports from countries like China.
“People are in shock. It seems commentators misread the mood of the country,” said veteran US aerospace consultant
Jerrold Lundquist, managing director of The Lundquist Group.
In Asia, shares in airlines with significant exposure to global trade, such as cargo giant Korean Airlines, fell as much as five per cent as Trump closed in on the White House. Air China’s Hong Kong-listed shares tumbled to their lowest level since June and automakers like Toyota, for whom the US is a top market, fell 6.5 per cent.
“This is part of a much broader problem that we’ve seen in the world, in which countries are turning inwards and reacting against globalisation and open borders,” said aerospace analyst Richard Aboulafia, vice president of Virginia-based Teal Group.
Investors at a major Airline Economics finance gathering in Hong Kong last week expressed alarm at a surge in unconventional politics from Britain to Washington and the Philippines – a trend that many expect will leave its mark regardless of how it translates into real policies.
That comes as an industry that depends entirely on the flow of goods and people faces doubts over its own economic cycle.
“We have seen a large section of the population that has not benefitted in the past decade and we are seeing support for populist politicians with simple answers,” Brian Pearce, chief economist of the International Air Transport Association told Reuters ahead of the election.
“Unfortunately, a lot of those answers are for protectionist policy solutions and air transport flourishes with open borders, so that is quite a dangerous development.”
International trips make up 64 per cent of global air traffic, according to IATA.
Executives at US auto companies said they were concerned about Trump’s stance on free trade, especially his tough talk on the North American Free Trade Agreement. They all have production sites in Mexico.
But industry executives and analysts said aviation had a history of riding out economic and political shocks. On average, plane makers insist, air traffic doubles every 15 years.
“If there are brakes on trade, there could be some impact on international travel. But you have seen more or less five per cent annual growth in traffic for decades,” Lundquist said.
And the defence industry could benefit, as a Trump administration spends more on the military and encourages even allies to shoulder more of the security cost. Defence stocks, including listed land mine manufacturer Ishikawa Seisaku, jumped.
After a bitter election campaign, trade experts said it remained unclear how Trump’s statements in favour of protectionist trade measures and tough immigration controls would translate into policy.
“The honest answer is that no one knows; even Trump himself doesn’t know,” said Bertrand Grabowski, a managing director at Germany’s DVB Bank which specialises in financing trade.“He campaigned not on ideas but on anger and frustration.”
Tighter rules could impact Indian IT services firms supporting companies in the US. Shares in companies like Infosys and Tata Consultancy Services were sharply down as Trump closed in on the White House.
For now, acquisitions at least will cool off, especially Chinese purchases of US companies. And for key sectors, competition will heat up. Europe’s Airbus and US rival Boeing in the $100 billion annual jet market could become even fiercer with more government lobbying support, adding stridency to efforts to compete for jobs.
Trump’s victory may also raise questions over plans to sell over 200 Western airplanes to Iran under a deal to lift sanctions that the President-elect has severely criticised.