President-elect Donald Trump’s policy agenda is generally good for business, top executives and analysts told me at the Goldman Sachs Industrial and Materials conference this week.
“It’s very bullish,” HEICO (HEI) co-president Eric Mendelson told me. “The Trump administration would be very positive for aerospace and defense and the vast majority of the CEOs and the executives with whom I speak feel 100% the same way.”
Trump’s economic policies include plans to extend tax cuts, scale back regulation, and promote domestic industries. But as strategists and economists have warned over the last few weeks, there are a few potential overhangs or challenges from his proposed policies.
For the industrials sector, two risks loom large: tit-for-tat tariffs resulting in inflationary pressures and proposed budget cuts.
HEICO’s Mendelson told me tariffs are something the company “has its eye on,” and it plans to “pass any price increases along to its customers.”
Companies with greater exposure to China, including Stanley Black & Decker (SWK), are adjusting their global supply chain — a strategy that’s been underway for years. Roughly a quarter of the company’s product is from China, down from approximately 40% about a decade ago.
“We’re going to have to continue reducing our US market exposure to the China market … and this administration might accelerate the pace,” Stanley Black & Decker CFO Patrick Hallinan said at the Goldman conference. “We will accelerate it if we see new tariffs coming into the market.”
The potential for higher prices as a result of tariffs has been echoed by others on Wall Street. Franklin Templeton Fixed Income chief investment officer Sonal Desai told me shortly after the election that a trade war and additional government spending could potentially lead to “greater inflation and wider fiscal deficits.”
Recently, the president-elect wrote in a post on Truth Social that he plans to impose a 25% tariff on products imported from Mexico and Canada, as well as “an additional 10% tariff, above any additional tariffs” on goods from China “as one of my many first Executive Orders.”
Trump has also threatened to impose a 100% tariff on BRICS countries — Brazil, Russia, India, China, and South Africa — if they attempt to undermine the US dollar.
His more aggressive approach on trade is a risk to economic growth and could be an “upside risk” to current inflation forecasts, Deutsche Bank chief economist Matthew Luzzetti warned on Yahoo Finance’s Morning Brief.
“It will lift inflation … it will tend to weaken growth and weaken sentiment, and therefore also damage the labor market to a certain extent,” Luzzetti said.
