Trump offers the best chance for business to reset

There’s plenty of volatility to come, but by playing under Donald Trump’s new world order, business is poised to thrive.

US President Donald Trump speaks during the inaugural parade inside Capital One Arena, in Washington, DC. Picture: AFP

A flurry of executive orders, more oil and less red tape; business and markets had better strap in for a wild ride as Donald Trump makes his return to the White House.

However, unlike the first time around, President Trump is a now a far, far more seasoned political operator. And while Trump’s defining approach has been about the element of surprise, he has given some clarity about the direction he is heading (although no one really knows).

For Australia, the new Trump era is the best chance to reset and force conversation around the need to revive sagging productivity. Trump’s core policies, from tackling high energy costs to cutting regulation, are pro-growth and about driving national wealth.

Shortly before the November US election, Citi’s closely-watched global chief economist, Nathan Sheets, sat down with The Australian and attempted to sketch a road map under Trump. The first phase was to expect a period of “uncertainty and volatility” through a change of administration.

Under the switch from Biden/Harris to Trump “you’re moving from one approach to another approach. And whenever you have a swing in policy trajectory, that creates uncertainty for markets,” Sheets said at the time.

It would take “months” for markets to digest it all, he said.

That phase one has certainly arrived, as bonds, currencies and share markets around the world – including in Australia – are all attempting to make sense of Trump.

Now it comes down to how just assertive he will be on his flagship economic policies: Tariffs, deregulation and energy.

There has already been some clarity in the first few hours of Trump’s presidency through the executive orders. This includes demands of 25 per cent tariffs on imports from Canada and Mexico from February 1.

But in a big shift, Trump has seemingly pulled back from universal tariffs on everything going into the US. Instead, he wants US government agencies to analyse trade and policies with China and North American allies. Some form of China tariff threats will come.

Trump has followed through with the Elon Musk-led Department of Government Efficiency to find savings. There was an executive order effectively ending work from home by demanding government workers in key agencies return to the office five days a week.

Most significant was the call of a “national energy emergency” to accelerate permits for oil and natural gas production.

He wants to fast track power projects to meet the needs of the next generation of technology in a nod to the massive amount of reliable energy needed to power artificial intelligence developments. In addition to overturning a TikTok ban, Trump is firmly onside with big tech.

The first few months of Trump’s presidency will bring with it plenty of market volatility. Picture: Getty Images

Sheets and his colleague, Citi senior global economist Robert Sockin, have forensically gone through Trump’s stance and policy claims since his election win. They’ve taken an ambitious stab at how the next few years will look under Donald Trump.

As a whole, they expect Trump’s policies to “add up to a complicated mix of favourable and adverse supply shocks and demand shocks”. However, for US economic growth, these effects are likely to net each other out. Areas like tariffs will skew toward some moderate inflation pressure.

All told, US monetary policy “may need to be a bit tighter”. However, for the rest of the world the message is not as good. Trump’s tariff policies will deliver a demand shock to those countries in the firing line of tariffs, which in turn hurts global growth.

Sheets says an important framing over his outlook is we have already seen Trump in the White House.

“In his first term, Trump was assertive in his rhetoric and policies, but ultimately avoided actions that were seriously disruptive,” he says.

The economy and markets also generally performed well during his first term.

[e-mail]

Originally published as Trump offers the best chance for business to reset