With each day of Trump’s presidency further disrupting the status quo, industries remain both excited and on edge. And while many headlines concentrate on what Trump’s presidency will mean for US manufacturing, business leaders are weighing potential impacts on a range of other industries.

As part of our exploration of the new Populism Pendulum, Frost & Sullivan’s Visionary Innovation Group analyzes the potential implications of Trump’s presidency in our report Trump’s Impact on Future Business in the United States.

For many industries, proposals around corporate tax reform and deregulation come as welcome relief; however, tough talk on trade could result in policies that offset growth gains, if global retaliatory measures are taken. Some industries will be hit harder than others. Below are four major industries anticipating the ways in which Trump’s influence will lean.

Military and Defense

The top five US government contractors operate in the military and defense industry. In 2015, they represented a total of over $77 billionin Department of Defense (DoD) contracts alone. Throughout his campaign, Trump promised to further increase defense spending, despite the fact that in 2016 it comprised almost half, 48.7%, of federal discretionary spending—already greatly overshadowing discretionary funds earmarked for education, transportation, veterans’ benefits, health services, and international affairs.

In particular, Trump has suggested that priorities would include modernizing the missile defense system, improving cybersecurity capabilities, and increasing the number of Navy ships and Air Force fighter aircraft. As such, defense contractors stand much to gain from a Trump administration working with a pro-defense Congress. Even Trump’s ultimatum that countries in the North Atlantic Treaty Organization (NATO) should begin spending a requisite 2% of GDP on defense or risk losing US military aid may spur faster growth in the global defense industry, as countries worldwide find expanding their military capabilities a necessity. Additionally, a more robust budget for border security technologies would direct funds toward such items as patrol vehicles, advanced recognition technology, helicopters, camera technology, and integrated fixed towers for long-range persistent surveillance.

On the flipside, Trump’s repeated outcry over the cost of acquiring defense assets has led to some price cuts on the part of contractors. Lockheed Martin, for instance, has lowered the price of its F-35 fighter jet—normally priced at over $100 million per plane—and Boeing seems poised to follow suit as it undertakes plans to replace an aging Air Force One. Thus, while the military and defense industry should anticipate the next few years to be boon years, it should also expect to be the target of very public negotiations on equipment and overrun costs.

Energy

Without a doubt the energy industry, particularly fossil fuels, expects to benefit during Trump’s tenure. Rebounds in the price of crude oil have helped renew domestic production in some shale basins. Plus, a laundry list of actions has demonstrated Trump’s commitment to supporting traditional energy sources: his America First Energy Plan, which directly states that America must tap further into shale, oil, and natural gas reserves, specifically those on federal lands; his appointment of Scott Pruitt—a well-known proponent of environmental deregulation—to head the Environmental Protection Agency (EPA) and former Texas governor Rick Perry as Energy Secretary; his expected executive order to begin dismantling the Clean Power Plan, enacted by Obama and currently under judiciary review; his stated goal to revive the long-declining domestic coal industry; and his executive orders to advance the Keystone XL and Dakota Access pipeline. When considered next to the potential for easing fuel mileage restrictions and America’s robust appetite for less fuel-efficient trucks and sport utility vehicles (SUVs), oil’s short-term future looks seemingly brighter than it has over the last couple of years.

Further, liquefied natural gas (LNG) may become a key US export if the Trump administration encourages the advancement of more terminals. Even renewables, which may be vulnerable to cuts in subsidies under a Trump administration, remain cautiously optimistic, hoping to persuade Trump to continue Obama-era support through economic arguments: the renewables sector directly employed nearly 400,000 more Americans in 2016 than fossil fuels, and was responsible for generating $245 million in income for rural property owners leasing land for wind projects.

However, Trump’s various agendas may place energy in a more conflicted position than initially anticipated. For instance, even though removing restrictions and accelerating pipelines may help boost oil and gas and drive energy independence, these actions will also increase the amount of crude on the market, potentially undercutting recent price gains. And, if Trump’s rhetoric on trade results in import taxes or tariffs, consumers could see higher prices at the pump, given that the United States imports about a quarter of its demand for petroleum products. Potential LNG exports may suffer from any retaliatory trade measure, as would US-based exporters of oil and gas equipment, whose number one export country is Mexico—one of Trump’s favorite punching bags. As for coal, virtually no analysis foresees a sustained revival due to the cost competitiveness of natural gas and renewables. Ironically, Trump’s regulation-lifting objective meant to increase natural gas production will likely help cement coal’s demise.

Agriculture

Like energy, agriculture could gain economically from less stringent regulations. For example, farmers and ranchers have complained that the “Waters of the United States” rule, which clarifies the waterways protected by 1972’s Clean Water Act, imposes costly permits and exemplifies government regulatory overreach. But the area of trade is where the effects of a Trump administration could really be felt.

According to the United States Department of Agriculture (USDA), the share of US agriculture exported has risen, growing from 13% in 1990 to 20% in 2013. In fact, the United States has been a net exporter of agricultural products since 1960, helping offset trade imbalances from other sectors. Critical export products include commodities such as wheat, corn, and tobacco, as well as dairy, meats, and poultry. Top export markets include countries most at risk of Trump-related trade disruptions: China and fellow NAFTA nations Mexico and Canada. Agricultural exports to China totaled over $20 billion in 2015, while those to Mexico and Canada totaled nearly $40 billion combined.

Further, if Trump moves ahead and supports either import tariffs or a border adjustment tax, fears of trade retaliations specifically targeting US agriculture will grow, particularly from China, with a government that tightly controls imports. Indeed, historical precedent supports the probability, as a 35% tariff on Chinese tire imports imposed by the Obama administration in 2009 resulted in total export decline of over 55% (impacted by a 90% decline in exports to China) and a $1 billion loss for the US poultry industry through 2011.

Another area of concern for agriculture concerns ethanol—an alcohol distilled usually from corn and used as a fuel source—and the mandate that obliges refiners to mix ethanol into the US gasoline supply. During his campaign, Trump seemed to support the ethanol mandate, seeking to win over voters in corn-heavy Iowa. However, EPA-head Scott Pruitt has opposed the Renewable Fuel Standard (RFS) program, which upholds the ethanol mandate. Given that the EPA controls the RFS and that Trump backs oil and gas, an industry that opposes the cutting of its product with biofuel, Trump’s administration could spell trouble for agricultural production.

Financial Services

From dismantling Dodd-Frank legislation to dissolving the Consumer Federal Protection Bureau (CFPB) and undoing the Department of Labor’s (DOL) new Fiduciary Rule, Trump’s promised platform comes as good news to the financial services industry, which has argued that post-financial crisis regulations have overcompensated in the wake of the Great Recession. In particular, as Dodd-Frank opponents argue, small and community banks may be experiencing disproportionate impacts from more stringent oversight due to greater compliance costs and increases in required capital levels. Indeed, two of Trump’s recently signed executive orders—one more generally aimed at reducing regulation and regulatory costs and the other specifically outlining the core principles for financial regulations—demonstrate that Trump intends to make good on his campaign promises. So far, the stock market has reflected confidence in a rosy future for financial services, as the share price of the SPDR XLF fund, which tracks a wide array of financial service firms, has continued to rise after spiking sharply post Trump’s election.

At the same time, benefits from deregulation may be offset if Trump’s trade policies become too protectionist. As Karen Shaw Petrourecently argued at AmericanBanker.com, America First means prioritizing America in finance trade. The problem with this is that it may require the country to pull out of the cross-border financial regulatory framework, and by pulling out, the United States would essentially encourage other economies to impose their own protectionist measures. Many of these measures would be aimed solely at creating barriers to entry and countering attempts to advantage the United States in the global financial market. The net effect would be to burden cross-border capital flow, and, in turn, weaken domestic financial institutions for which cross-border products are vital.

But another issue is at play in Trump’s approach to financial services—competition, specifically from FinTech start-ups. Prior to Trump’s election, the CFPB published its report on Project Catalyst, a program for promoting innovative, consumer-friendly financial services products. One critical challenge for FinTech noted in the report was the issue of uncertainty around regulation compliance. As a response, the CFPB has undertaken measures to help innovative financial services’ products succeed in the current regulatory environment, including issuing a “no-action letter,” which allows businesses to seek agency approval to test products and services for a set period of time without having to abide by regulations. With the CFPB in jeopardy, FinTech may lose a key ally in bringing innovative services to market. At the same time, FinTech, like traditional financial services companies, should benefit from less regulation in general. The question remains: Will established entities pursue partnering or acquiring FinTech solutions to keep competition at bay, or will the FinTech revolution cool, as big banks find greater strength in the lifting of compliance mandates?

Perhaps the only certainty is that many scenarios for how Trump’s presidency will play out are possible, and all industries must prepare to respond before events unfold.

About Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

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