Not for the first time in his life, US President-elect Donald Trump has stunned the nation and the world.
His largely unexpected victory heralds political change of a kind that only comes once in a generation. Such change, by its nature, breeds uncertainty.
Today, people across America – and beyond its shores – will be asking one question: what does this mean for me?
But they are not the only ones with questions. Businesses will also be thinking through the implications – and UK retailers are among them.
The first point to make is that much of the impassioned heat of the campaign and its immediate aftermath should be disregarded.
The president is not a lone actor who has total control. There are deliberate checks and balances on the power of the office.
This alone ensures that radical policies will be softened and that the pace of change will be moderated.
Change, however, will come. And the good news for UK retailers is that not all of that change will be negative.
Friendlier business environment
Those with operations within the US will, over the medium term, find burdens on their businesses reduced.
Corporation tax will come down, healthcare costs will be slashed, and red-tape is likely to be cut – especially for those firms looking to grow and create jobs for Americans.
“In the short term, uncertainty in the US will ease some pressure on the pound as the dollar sinks”
In short, the business environment will become friendlier and more conducive to growth.
Those not present in the US may also benefit. Unlike his President Obama, President-elect Trump is highly likely to prioritise some sort of trade deal with the UK.
While the terms of this agreement are open to speculation – the timing will be protracted as ratification can only come with the UK’s exit from the EU – it will inevitably mean that trade between the UK and US will become easier and stronger.
This is something UK retailers can take advantage of.
In the short term, uncertainty in the US will ease some pressure on the pound as the dollar sinks.
This is unlikely to undo all of the depreciation sterling has seen over recent months, but it will take the edge off the decline and stop further inflationary pressures.
The positives, however, will be counterbalanced by a number of negatives.
Outside of any potential trade deal, importing and exporting could become more challenging.
If a Trump administration places tariffs on goods from China and elsewhere, UK retailers present in the US could find it more expensive to bring goods into the country – a particular problem given the international nature of retail supply chains.
“Barriers to the free movement of parts or increased costs in the supply chain will inevitably find their way through to the consumer”
If the Trump trade policy results in a more closed global economy, even UK retailers that have no relations with America could be affected.
If US policy pushes up costs for Chinese manufacturers or reduces their economies of scale, retailers might find the goods they source become more expensive.
Prices in the UK may also rise for products made by American firms. Apple’s devices, for example, are reliant on Chinese manufacturing.
Any barriers to the free movement of parts or increased costs in the supply chain will inevitably find their way through to the consumer.
Perhaps the most significant negative, however, is uncertainty.
It will prolong investment decisions for both UK retailers investing in the US and for US retailers investing in the UK.
It will make takeover and merger activity in retail more challenging.
It will give retailers yet another variable to think about when making decisions.
And it will likely cause nervousness among markets with a knock on impact to consumer confidence, even in the UK.
The concern is that, should a Trump presidency be erratic, uncertainty may increase as his term of office progresses.
As challenging and undesirable as it might be, retailers now need to reframe their strategies in the knowledge that the established order is changing and that churn will continue.
In this, they would be wise to heed the advice of President Kennedy who, in 1963, said: “Change is the law of life. And those who look only to the past or present are certain to miss the future.”
- Neil Saunders is managing director of Conlumino