Tesla is up 18% versus Trump 2.0, but will the new president abandon support for wind, solar and electric vehicles?
With Donald Trump decisively defeating Democratic candidate Kamala Harris to take over the White House, there will be business winners and losers.
The biggest economic losers under Trump are likely to be clean energy companies, with the outcome of the presidential race likely to see reduced commitment to the renewable energy sector.
The markets reacted mixed. Elon Musk’s Tesla is up 18 percent on the ‘Trump trade’, while First Solar is down 10 percent.
‘Drill baby drill’: Trump will throw his weight behind traditional energy sources after his election victory
Kamala Harris was undoubtedly the greener of the two candidates.
Tom Sosnoff, CEO of the financial network Lekkerlive, said: “Trump has spoken out about his skepticism about global warming and climate change.”
Trump said last month in the wake of Hurricane Helene: “Did you ever notice how this was such a big deal, the environmental issues… it’s one of the biggest scams of all time… people don’t buy it anymore. ‘
Helene was the strongest hurricane to hit the Big Bend area of Florida since 1851, causing more than 100 deaths.
Trump expressed his views on climate issues earlier this year, with the Republican candidate saying in July: “All the trillions of dollars that haven’t been spent there yet, we will divert to important projects like roads, bridges, dams, and we will not allow it is spent on pointless, new, green scam ideas.”
It appears that Trump could be positive for the traditional energy sectors.
Morgane Delledonne, head of investment strategy at Global
“This could lead to reduced federal support for renewable energy sources such as wind, solar and electric cars, with likely rollbacks of tax credits and emissions regulations with a possible total repeal of the Inflation Reduction Act under Republican reach.”
However, Justin Onuekwusi, chief investment officer at St. James’s Place, points out that traditional energy sources performed better under Biden as a result of external geopolitical forces.
He said: ‘It is so important not to predict the response of sectors based on politics, because it is not just politics that can drive the market. What ultimately drives the market are profits. The thing that affects profits may be policy, but there are many other exogenous factors that can do that.”
Will Trump repeal the Inflation Reduction Act?
The Inflation Reduction Act, passed under Joe Biden, included $375 billion in climate incentives that could cut U.S. emissions by two-fifths by 2030, including electricity emissions by 80 percent.
However, with Trump now president, there is a possibility that the law could be repealed if he comes clean. This could be difficult for companies in the clean energy sector.
Rahul Bhushan, managing director of Ark Invest Europe, said a repeal “could cause immediate headwinds for clean energy projects, as the law’s financial incentives are crucial to many companies’ plans for scale and innovation.”
Bromance: Trump has received support from Tesla boss Elon Musk, despite the Republican candidate’s lack of support for electric vehicles
“Major players in the renewable sector, including Tesla, Sunrun and First Solar, have aligned their strategies with these federal subsidies and a repeal would likely slow expansions and reduce expected returns on their investments.”
Similarly, Sosnoff warns: ‘Clean energy companies that rely on government subsidies to increase their competitiveness could face reduced market presence (in the event of a complete withdrawal), and companies that focus on clean technologies risk their financial viability without regulatory support, which has a negative impact on market confidence in renewable energy sources. .’
However, Bhushan also argues that a repeal would face major obstacles, especially since the Biden administration has already pushed to allocate 90 percent of IRA funds by the end of the 2024 fiscal year.
“The likelihood of a complete withdrawal is low,” he said.
China will face heavy tariffs
Trump is more in favor of traditional forms of energy. “Drill, baby, drill,” the new president sang during the campaign, promising to boost oil and gas production.
The country produced 13.4 million barrels of oil per day in August, a record high.
Despite Trump’s oil-slick rhetoric, the new Republican administration is unlikely to see a total shift away from renewable energy sources.
However, it is more likely that nuclear energy will be the main benefactor as Trump returns to power.
“Trump has shown an openness to nuclear power as part of an independent energy mix, which could lead to investments in new technologies such as small modular reactors (SMRs),” Delledone told This is Money.
She added: “His administration can streamline regulatory processes, making it easier for new nuclear projects to move forward. However, without targeted subsidies, nuclear energy can still compete with natural gas and renewables for investments.”
According to Bhushan, an important motivation for Trump is the energy security that nuclear energy provides as an energy source.
He said, “With Trump’s favorability toward nuclear power and natural gas, businesses in these areas could see a boost, especially as nuclear power gains renewed attention as a reliable, low-emissions energy source.
“This diversity could provide a balanced energy strategy that places a stronger emphasis on American energy independence.”
However, this could also benefit other parts of the renewable energy sector, as investments in wind and solar energy both increase energy security.
Domestic companies could benefit under Trump, according to Seb Beloe, head of research at WHEB Asset Management.
He said: “We expect US companies to benefit in both scenarios. As the only major U.S.-listed solar panel manufacturer, we believe FirstSolar is best positioned given its domestic manufacturing footprint and U.S. base.
Under Trump’s presidency, Chinese companies are likely to be increasingly excluded from the US market.’
Daniel Lurch, portfolio manager of the Green Planet fund at J. Safra Sarasin Sustainable Asset Management, said: “During his campaign, Trump talked a lot about tariffs. Under his leadership, there could be an increased risk of tariffs on clean energy imports, particularly solar and storage equipment from China.
“This is not new, as both Democratic and Republican administrations have implemented and expanded tariffs.
“Consider, for example, that Trump has already imposed a 30 percent tariff on imported solar cells under Section 201, which Biden has extended to 15 percent.
“We believe that any new tariffs will encourage developers to go further onshore and strengthen their supply chains, which should benefit domestic solar and storage equipment manufacturers.
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