Why did Trump win and what does his victory mean?
Donald Trump has won - and won bigger than most of the pollsters predicted (a hat tip to my friend James Johnson, whose firm JL Partners was one of the few who came close). At the time of writing it looks like he might win all seven of the marginal states and the popular vote. The supposed “gold standard” poll that predicted Kamala Harris would win Iowa, a Republican state in recent years, proved miles off (at the time of writing, Trump is winning Iowa by 13.5 percentage points).
For the Democrats, the inquest begins
Biden and his advisers will rightly be blamed for taking so long to work out he wasn't up to running again. Ditto Harris for not differentiating herself enough from him.
But even if Biden had announced he was standing down early enough to allow the Democrats to run a competitive primary, the size of Trump’s victory suggests that whoever they selected would probably not have beaten him. Incumbents are struggling across the world at the moment because we have been through a cost of living crisis that has left most voters worse off. And perhaps because they are worse off, voters are increasingly concerned about mass immigration - particularly if it is uncontrolled. Ultimately, these concerns trumped (excuse the pun) whatever concerns voters had about Trump’s character.
And whilst the Democrats' significant fundraising and therefore spending advantage might have saved them from an even heavier defeat, there is a clear lesson here that the right product is more important than a slick marketing machine.
So what does Trump’s victory mean?
The Republicans also gained the Senate (at the time of writing, Decision Desk HQ is projecting 53 to 47) and look like just holding the House (at the time of writing, Decision Desk HQ is projecting 218 to 217). Factor in a conservative Supreme Court and Trump could well be unconstrained.
In terms of what that means,the size of the Republicans’ victory in the Senate will make it difficult for the Democrats to turn things round in two years’ time.
A second Trump term will likely cement the conservative majority in the Supreme Court.
Trump will extend his tax cuts but probably not cut spending commensurately, so the US deficit is going to get even bigger. Will the markets finally lose patience?
He will deregulate, scrapping lots of President Biden’s environmental regulations in particular, and take the US out of the Paris Agreement on climate change again (and perhaps the UN Convention that underpins it, which would make it harder for a future US Administration to rejoin). However, some of the green subsidies in the Inflation Reduction Act will likely survive because they are benefiting Republican states.
He is going to increase tariffs. Other countries/economic blocs will inevitably respond (he is highly unlikely to implement the OECD agreement on corporate taxation, so one of those responses might well be a return to digital sales taxes that target big US tech companies). Time will tell whether the increases are a short term negotiating tactic as his supporters claim (Trump adviser Scott Bessent described Trump’s approach as "escalate to de-escalate") or a permanent shift to protectionism.
He has promised ”the largest deportation programme [of undocumented migrants] in American history”. Both that and the tariff increases will increase inflationary pressure.
Time will tell whether he will pursue those he perceives to have persecuted him for the last four years. Both the deportation of undocumented migrants and any attempt to take revenge on his opponents will only deepen polarisation in the US.
He will put pressure on NATO allies as well as the Japanese, South Koreans and Taiwanese to cover more of the cost of their defence. He has a point - but the more aggressive he is about it in public, the more Putin and Xi will question his commitment to collective security.
He will try to end the Russia/Ukraine war. The concern many have is that he has more leverage over Ukraine than Russia, so any such attempt is likely to be disadvantageous to Ukraine.
The Netanyahu Government is worried that although he will be publicly more supportive than Biden he may privately pressure Israel to set an end date for the war in Gaza and Lebanon. Many of the people who worry about the pressure he will put on Ukraine will welcome him putting such pressure on Israel.
His victory will encourage the populist right across the democratic world. Nigel Farage, Marine Le Pen, Viktor Orban and their equivalents will be celebrating this morning.
And finally he will bring unpredictability to geopolitics. His supporters see that as an asset. Ric Grenell - a candidate for Secretary of State - said recently that “predictability is a terrible thing”; others think predictability is key to deterrence. Trump is at heart a real estate deal maker, and the lesson he learned in his business career is play your cards close to your chest and see what people offer you. Unlike other heads of government, he doesn’t distinguish between allies and hostile countries - indeed, he sometimes seems to view allies as more of a burden than an asset and identifies with other ‘strong leaders’ whether or not they were democratically elected. What matters to him is what he is getting from the deal, not the US’s relationship with whoever he is dealing with.
The one thing that is not going to change is Donald Trump himself. Like him or loathe him, he is a chaos agent. The next four years are going to be a bumpy ride...
Spare a thought for Keir Starmer…
He can't admit it, but this is the result Keir Starmer was dreading. He would have found it much easier working with Kamala Harris both on a personal level and ideologically. When Trump says or does controversial things, Starmer will come under pressure from some Labour MPs to condemn him. If he does, Trump will take it personally - as I can attest from my time working for Theresa May. Starmer knew this result was a possibility, and he has prepared for it meeting with Trump on his last visit to the US and speaking to him in the wake of the attempt on Trump’s life. We will see now whether those plans survive contact with the chaotic reality. As Mike Tyson famously said: “Everyone has a plan until they are punched in the face”.
If your organisation would like a more detailed briefing on what the result might mean for you, get in touch.
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