A Trump White House: Potential Impact on Commodities

Many of the policies President-elect Trump discussed on the campaign trail align with current and past GOP tendencies but others seem diametrically opposed to GOP DNA.

How President-elect Trump interacts with the GOP will give us clues as to how policy positions could ultimately impact global commodity prices.

Agricultural Commodities
A trade war would hurt many American farmers as the US is a major exporter of agricultural products, including wheat to the Middle East and Asia, corn and ethanol to Latin America and soybeans to China. If the Trump administration introduces energy policy that makes renewable fuel standards less onerous, demand for ethanol and biodiesel for blending might be negatively affected, thereby impacting corn and soybean prices.

Metals & Mining
President-elect Trump is likely to push for an infrastructure program as he noted repeatedly during his campaign. In my view, this would be mostly positive for metals and mining, particularly steel and copper, but a lot will depend on what kind of infrastructure plan is unleashed. Trump, with his real estate pedigree, might be inclined to build new projects like highways and bridges, which would benefit the steel and copper industries. However, there could be pushback on this plan if the moderate fiscal-conservative wing of the party tries to steer towards incentivizing the private sector to build infrastructure through tax breaks and regulation reform. This would be less of a boon for metals and mining because it might result in overall smaller infrastructure stimulus.

Another outstanding issue for metals and mining is how serious the Trump administration will be in curtailing current trade agreements. I believe that a trade war with China and/or Mexico would negatively impact emerging market growth and would likely hit metal prices.

If there is one major area of consensus between the populist and fiscal conservative wings of the Republican party, it is on energy policy. Energy companies are likely to see some tax relief under Trump. Stalled oil pipeline projects, including the Keystone, could be approved and moved forward in my view. The potential impact on oil prices is not clear at the moment, though with less regulation, I expect somewhat higher US oil production. Additionally, a stronger US dollar could be a slight negative for oil prices while strong US infrastructure stimulus could increase oil demand.

It is unclear how the Trump administration will approach Iran. If the President-elect goes the path of isolationism, eliminates the standing deal and reinstates sanctions, it could be positive for oil prices.