Many Americans are going to sleep in shock tonight, just as the rest of the world wakes up to the realisation that businessman Donald Trump is now the president of the most powerful country in the world. We are reminded of 24 June when Brexit happened.

This campaign has certainly been a rollercoaster ride and no doubt change is in hand. History is being written and the stakes have never been higher. Markets are all down and gold is up.

So, why are the markets so worried about a Trump presidency?

Last Friday, saw US stocks post their longest period of decline since 1980, largely as a result of anxiety about what Trump might implement. Given his campaign comments, a Trump president is seen by investors as unpredictable, risky and will create a lot of uncertainty – much like Brexit. A Clinton president was seen as the safer bet.

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In essence, this is simply not the result investors wanted. His policies, especially on trade and foreign policy, have been unpredictable and erratic.

Markets will be nervous to see how committed he is to steering America in the direction he has indicated during his presidential campaign. Be that on bringing back jobs to the US, building a wall, or closing down international trade talks. The potential for him to affect his policies is great. Especially if the Republican party gets the senate and the house.

Why Trump?

So, why did the electoral do what they did today? This campaign has divided America. Even within households, families are divided. Amazingly, Americans are in shock as they observe in disbelief at how they have ended up with a Trump president, echoing what was felt in the UK with Brexit.

No matter what, middle America liked what Trump campaigned for. It is said he stands for what people have been thinking for many years but were afraid to say. They understood his simple message: “Make America great again.”

Isolated, shrinking in number, farmers and rural America feel they are no longer key to the US economy

He makes sense to white working-class blue-collar voters. The trade deals that might have been successful to Washington and the US and big corporates have not been seen as successful to people in the mid-American states.

Also, there is a deepening divide between rural and urban America. Isolated, shrinking in number, farmers and rural America feel they are no longer key to the US economy. Rural America now finds itself politically abandoned and this has played out with the election of Trump.

This is a vote by the American people saying they want change. They don’t want people in Washington who make promises that don’t get followed up. They want someone who will tell them the truth and who will let them decide.

What about farmers?

Americans are so far removed now from where their food comes from and many are three or four generations removed. Less that 1% of the population are now farmers.

Farmers and the members of the Farm Bureau – an overwhelmingly conservative, strongly Republican group – have traditionally gotten what they wanted on Capitol Hill.

Pro-farmer in the US means producing as much volume for the least cost in many commodities such as maize corn, milk and beef. It effectively focuses on delivering cheap corn to elevators

Rural America is the party’s base, suggesting that farmers continue to vote Republican. But their candidate has definitely divided. Trump favours the continuation of the farm bill and he is in general pro-farmer.

Pro-farmer in the US means producing as much volume for the least cost in many commodities such as maize corn, milk and beef. It effectively focuses on delivering cheap corn to elevators.

But farmers also depend on low-cost non-national labour. Building a wall will not aid this.

So, while Trump may be the catalyst for change US voters want right now, what does it mean for farmers on both sides of the Atlantic?

The ending of the free-trade era?

The Obama administration may go down in history as the highest point of the free-trade era. The world is certainly an easier place to do business globally than it was eight years ago.

However, a Trump president looks like it would sound the death knell for future trade agreements, turning the US into a more inward-looking country.

The Transpacific Trade Partnership (TTP), which was to have been the biggest regional free-trade agreement in history looks like it will be scrapped. This is significant – no trade deal of this size has been seen since the 1994 completion of the Uruguay Round of the GATT world trade talks that created the World Trade Organisation. The same plight is almost certain for the Transatlantic Trade and Investment Parntership (TTIP) with the EU.

One potential beneficiary of the scrapped trade deal talks is the UK

This could make Irish agri-food exports more difficult to the US due to an increase in import duties and tariffs. Irish products, such as cheese and butter, would suffer. It could topple Kerrygold off the number one imported butter position in the US. Exporting high-end beef cuts would almost certainly be off the table.

However, on the other hand, it would make imports of US beef and dairy more difficult into Europe.

One potential beneficiary of the scrapped trade deal talks is the UK. It opens the door for the UK to negotiate its own bilateral trade deal with the US. Therefore giving the UK access to the largest meat and dairy producer in the world, while providing the US access to the most advanced and sophisticted grocery market in the world.

Similar to what was seen with Russia and the western food ban, this would displace Irish and EU food products, fuelling volatility while reducing prices. It is also likely that high tariffs will be placed on Chinese imports to encourage bringing jobs back.

Pro-US Agriculture

The US has never before been so involved in global markets. For example, it now exports about 14% of its 96bn litres of milk. This is some 13bn litres, or about twice the size of Ireland’s milk pool. If the US turns the supply tap on or off, the world’s farmers will feel it.

How US farmers are doing economically impacts Irish farmers directly. The Trump Administration looks set to be a pro-agriculture administration. His commitment to the US farm bill and farmer is perhaps best outlined with his comment: “Family farms are the backbone of this country and we are going to end this war on the American farmer.”

He has said that he will reduce the power of government bureaucrats and increase the freedom of farmers to be as productive as possible. He said he will reduce regulation and red tape for farmers and “extreme environmentalists” will no longer be entertained. He has also commented that “US farmers care more for the environment than the radical environmentalists”. Adding that many of the environmental regulations are being used to oppress farmers instead of actually helping the environment.

It looks unlikely he would do anything to support organic agriculture

He does not support labelling foods made with GMOs. It also looks likely that he won’t be initiating any other restrictions on the use of biotechnology in agriculture.

He plans to lower the tax rate on family farms down to 15%, he wants to protect the Renewable Fuel Standard and he wants to eliminate the EPA (Environmental Protection Agency).

That would mean it looks unlikely he would do anything to support organic agriculture, and means loose restrictions on the use of agrichemicals. He has also called for separating the Supplemental Nutrition Assistance Program (food stamps) from the farm bill.

Trump has also publicly stated his support for the biofuel industry, which, in essence, means continued stability on the policy front as this industry continues to expand. This is all-important in maintaining a floor on corn prices.

Comment

All of this paves the way for a very pro-farmer environment for US agriculture. Europe has decisions to make, especially as the first talks of CAP reform start next year.

Already playing on an uneven field with no access to GMOs and increasing restrictions on the use of glyphosate and other chemicals, the European farmer’s field will not only be uneven but will have huge rocks in it.

Does Europe want to allow the European farmer to compete on the global stage? If so, how will it support this given that an increasing amount of obstacles are placed in front?

Read more

Will Trump make American farmers great again?