Risk managers mull economic and political impact of Trump victory

A Trump victory was not a surprise given that the polls had been locked in a virtual tie for the weeks leading up the election day. But the extent of the victory – with Trump winning the popular vote as well as the electoral college and the Republicans reclaiming the Senate and, at the time of writing, potentially the House of Representatives – was beyond all polling. The impact of the election was felt far beyond Washington and the borders of the US. In Dublin, risk management association Airmic was holding its Island of Ireland conference. A session on the US election had been scheduled for the afternoon and the expectation was that the result would still be unknown by that point. Instead, the two panellists, Stephen Cross, group COO and head of innovation and strategy at McGill and Partners, and Sam Wilkin, director of political risk analytics at WTW, were left to consider the economic impact of the stunning victory and the implications for risk managers. The greatest challenge for Trump could be what Cross described as the curse of power. Presidents do not typically have a huge economic impact on the US or the world. The previous incumbent, Joe Biden, brought in the Build Back Better economic reform package, which had an impact on inflation. If Trump introduces his tariff-based policies, they will likely be inflationary too, suggested Wilkin. “So winning the House of Representatives and the Senate could be bad news for Trump in that it forces him to introduce the policies he has been promoting in his campaign – mass deportations and trade tariffs – both of which could have an adverse impact on the US economy.” The panel and the audience also discussed the political risk ramifications including social unrest and the potential threat to democracy itself. It was agreed that the prospect of political violence would have been higher if Kamala Harris had won the election or if Trump faced the prospect of prison from the various criminal cases that are now expected to be dropped. Nevertheless, both Cross and Wilkin advised risk managers to study their political violence and social unrest coverage very carefully. While a repeat of the 2021 insurrection in Washington looks unlikely, political propaganda has been supercharged in the social media age and political demonstrations have become larger and more prolific – not just in the US but around the world. The danger for companies, especially retail outlets with properties in major urban centres, is that insurers stop covering property damage from social unrest, as has already happened in cities such as Paris, leaving the state to foot the bill. As for the threat to democracy, the US is still one of the richest countries in the world and democratic crises tend to happen in the developing rather than developed world. Instead, agreed Cross and Wilkin, we are likely to see ongoing arguments over the rules of democracy rather than democracy itself. For example, will there be more political involvement in the Federal Reserve, which has been independent up to now? And will we see a change from the meritocratic civil service, which is agnostic to the winning candidate, to a strategy where the victor gets the spoils? The discussion also looked at where the blame should be levelled by Democrats for their unsuccessful campaign. For example, were the Democrats too slow to replace Biden? “A big trend has been to throw out the incumbent whenever there is high inflation and Biden must take some culpability there – the Build Back Better policy contributed to inflation,” said Wilkin. “But while getting rid of him sooner may have helped, this was really an election with only one candidate. People were either voting for Trump or against him.” But while the US political landscape looks more polarised than ever, there are some areas of consensus when it comes to the more interventionist policies, said Wilkin. For example, when Trump came to power in 2016, he kept Obamacare in place despite vowing to repeal the act. In 2020, Biden kept many of the trade tariffs in place, while also finalising the military withdrawal from Afghanistan, a move that was started by the Trump regime. It remains to be seen whether Trump will choose to leave some of Biden’s economic policies in place – namely the green policies and the antitrust policies. “Despite the polarisation, there is more consensus in certain areas than we have seen in 30 years. Consequently, there are some big legacy policies that might survive,” said Wilkin. In terms of foreign policy, the biggest change will be stylistic rather than policy driven, suggested Wilkin. “Biden had a multilateral approach where he would like to get Allies together before taking any action, as was the case in Ukraine. Trump is instinctively a unilateralist or bilateralist.” In his previous presidency, this approach did not prove especially successful with adversaries like North Korea or Russia. but was more successful when applied to traditional allies such as Germany in terms of increasing their contributions to Nato.

Risk managers mull economic and political impact of Trump victory

News of the win broke at Airmic’s Ireland conference

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