- Tax cuts: Trump likely to extend the current individual tax reductions under his old Trump Tax and Jobs Act when it expires in 2025, with potential revenue loss of around USD 4.5 trillion over the next 10 years to the exchequer and little to no direct impact on overall growth.
- Renewable Tax Credit: The planned repeal of specific tax credits, like the EV credit, may be reconsidered due to influential voices in the administration, including Elon Musk. Could lead to a marginal drag to overall economy, but more sector-specific like US EV sales to slowdown which will impact incremental metal demand, especially copper.
- Spending: Spending likely to remain elevated with emphasis on infrastructure and defense. Higher industrial spending along with relaxed mining & fracking regulations.
- The Fiscal deficit to broadly widen on account of lower taxes and high government spending levels.
- China Tariffs: Tariffs will go up, but not likely as high as what is threatened (unlikely that 60% blanket tariff on Chinese goods goes ahead); may be additional tariff of between 10% and 20% on goods made in other countries as well. This will lead to higher domestic prices for imported goods which could lead to inflationary pressures on the economy.
- Interest rate front: The Fed’s planned interest rate cuts for 2025 could be adversely impacted if inflation stays elevated amid higher fiscal deficits and inflation. This will lend support to US yields and could subsequently point to a stronger Dollar.
- The incoming Trump administration will likely take a hard hand towards Iran and its proxies in the middle east region.
- Can start with forcing a ceasefire and hostage rescue deal through between Israel and Hamas.
- Ukrainian war support and funding likely to dwindle and some sort of peace deal being agreed; However, long term end to war looking unlikely under current circumstances.
- Past Presidencies: This was Republican Party’s 7th Presidential Win out of 11 since 1980. During this time period, Republican presidencies have seen moderate to strong GDP growth rates along with sustained pace of debt and fiscal expansion. The US Dollar has gained strength in the first year of and subsequently weakened across most of the previous Republican presidential terms.
- US Crude Oil Production: After no major auctions of new shale oil basins in the last four years, return of Republican administration is expected to result in auctioning new shale basins in 2025. Auctioning new shale basins is anticipated to result in increasing Capex by Oil & Gas Exploration & Production companies in the US. With expected improvement of Oil & Gas drilling rigs and Drilled but Uncompleted (DUC) wells, the US crude oil & total petroleum liquids production is expected to remain on a strong note reaching to a fresh-record high levels of 14 Mbpd during H2 of 2025 from current 13.4 Mbpd.
- US-Middle East Relations: During the last presidential tenure of Trump, he used to maintain good relations with Saudi Arabia but lately tried to pressurize OPEC (especially Saudi Arabia) to cut supply during Covid period. With Saudi planning to join BRICS would give it more leverage while increasing its negation power. Again, as an offset factor to the US crude Oil production increase would be seen in form of stricter sanctions on Iran crude oil exports, whereby the current production of Iran would reduce from 3.3 Mbpd towards 2.2 Mbpd by end of 2025.
- Canadian Keystone Pipeline: Trump is likely to support the extension of this pipeline reversing the decision took under Biden administration in Jan’21. Prospects of extending this pipeline are likely to restart in 2025.
- A trade war with China would result in increase in Chinese antidumping duty on imported soybean and corn from USA which shall make the US domestic soybean availability very high resulting in a depressing the prices. However, a hike in import duty on UCO would reduce the UCO imports by 800-1000KMT which is been routed from China via other countries like Canada and Mexico, which in turn would improve the demand for domestically produced soybean oil.
- Again, with China veering away from US soybeans, it would rely heavily on South American soybean and in turn make the soybean availability tight there. This would strengthen the South American soybean, meal and oil basis. With US soy oil becoming cheaper vs South America, exports of soybean oil would accelerate. If US biodiesel consumption is reduced, SBO exports from USA would accelerate rapidly and could potentially reach 1.5 MMT into 2025 vs 0.3 MMT in 2024. This would offset the lower SBO exports from Brazil and Argentina.
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