Former President Trump Dominates Super Tuesday as Republican Candidate: Market Nervous About Potential Re-election Impact

On March 6, “Super Tuesday,” a time of intense primary voting for the U.S. presidential election, former President Trump (pictured) showed overwhelming strength as the Republican candidate. Photographed at an event held on the 5th at his mansion “Mar-a-Lago” in Palm Beach, Florida (2024 Reuters/Marco Bello)

TOKYO (Reuters) – Former President Donald Trump showed overwhelming strength as the Republican candidate on “Super Tuesday,” a time of intense primary contests for the U.S. presidential election. Although many in the Japanese stock market are accepting the results as expected, market participants are becoming increasingly nervous about his words and actions in the run-up to the general election in November, given that the market is in a high range.

A fund manager at a domestic investment company points out that the market is “starting to exercise its mind” in anticipation of Trump’s re-election.

According to Real Clear Politics, an American political information site, the average support for Trump in various public opinion polls is 47.5%, higher than incumbent President Biden’s 45.5%, making it difficult to predict.

In a February Reuters survey of companies, 49% of companies said they would “feel it a risk” if Trump were to return.

Tohide Kiuchi, an executive economist at the Nomura Research Institute, predicts that the U.S. financial market will experience a “triple depreciation” during the administration, with a weak dollar, low stocks, and low bonds.

As was the case last time, the tax cut policy that would provide a boost to Wall Street and industry will not be implemented, and the negative effects of protectionist trade policies, which could be a headwind, are expected to intensify.

On the other hand, Shingo Ide, chief equity strategist at Nissay Research Institute, said, “Although there may be a follow-on rise in U.S. stock prices, Mr. Trump is aiming for a weaker dollar, and the risk of a strong yen smolders.Japanese stocks should be discounted. “There seems to be a need for it,” he said, noting that global financial markets would not necessarily react in the same way.

There were many inflationary events under the previous government. Protectionist policies are expected to increase import prices, immigration restrictions are expected to cause wages to rise due to labor shortages, and Trump’s idea of ​​a weaker dollar means that he has called for monetary easing from the US Federal Reserve, causing inflation. “There may be a risk that interest rates will not be raised if this cannot be contained,” said Yoshimoto, a former senior economist at Nomura Securities.

According to calculations by Nomura Research Institute’s Mr. Kiuchi, adding a 10% tariff to imported goods will increase the domestic demand deflator by 1.2%, assuming that the increase in the price of imported goods is completely passed on to domestic products.

This will put a damper on the stable downward trend in prices and create a headwind for personal consumption. It has also been reported that the United States is considering imposing tariffs of more than 60% on all imports from China, which could accelerate the trade war if China retaliates.

Mr. Trump has a history of placing orders on the policies of the Federal Reserve, which is supposed to be independent from politics. Mr. Kiuchi said, “If the Federal Reserve becomes too conscious of its independence from politics, the amplitude of its monetary policy, economy, and finance could be expanded.”

There is also the reading that this is not only a negative factor for Japanese companies. Koichi Kurose, chief economist at Resona Asset Management, said that if pressure on China increases, “money fleeing from China will flow to Japan.”

On the industrial side, there is speculation regarding the strategies of automakers. Mr. Trump has expressed skepticism about decarbonization. This is seen as a reversal of the shift to electric vehicles (EVs) and is positive for Japanese car manufacturers, which are strong in gasoline and hybrid vehicles. “There seems to be an ironic benefit in that the delay in the EV strategy will work out positively,” said Seiji Sugiura, senior analyst at Tokai Tokyo Intelligence Lab.

At the same time, the global trend toward decarbonization is expected to continue, and Sugiura said, “This will buy us time to catch up in the EV field.”

On the other hand, there are some points to be wary of. The former Trump administration reviewed the North American Free Trade Agreement (NAFTA) between the United States, Mexico, and Canada and compiled the United States-Mexico-Canada Agreement (USMCA), and there are concerns about the risk of further changes to the framework.

In a Reuters poll in February, some people said they would “delay the timing of investment in Mexico (we will decide based on the results of the presidential election)” (transportation equipment).

The previous administration imposed tariffs of 25% and 10% on steel and aluminum, respectively, based on Article 232 of the Trade Expansion Act, which gives the president the authority to impose import restriction measures such as tariff increases and import quotas. There is also a history of investigations into automobiles and their parts, and there is a risk that tariffs on automobiles, which were not implemented under the previous administration, may be reinstated.

There are also concerns that it may interfere with individual corporate activities. Most recently, he surprised the Japanese business community by objecting to Nippon Steel (5401.T), opens new tab’s acquisition of US Steel (XN), opens new tab.

While there is a view that the acquisition target was a company that symbolizes the United States and that the company’s performance is “suitable for labor unions,” (Ichiyoshi Asset Management Director Mitsutoshi Akino), the line is not clearly drawn, and when acquiring an American company, This seems to be a smoldering factor in the uncertainty. Some believe that being able to explain the advantages of the United States will be important.

However, there is still a long way to go before the finals in November. “Mr. Trump is also unclear in his words and actions, and there is a different level of risk involved in making actual investment decisions,” said Ide of the Nissay Research Institute.

(Noriyuki Hirata Edited by Hiroshi Hashimoto)

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2024-03-06 08:38:23
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