An end to uncertainty?

In discussions about markets for recycled materials as U.S. elections approached in November, uncertainty was a common theme. However, the election results might not have dissipated that uncertainty as we wait to see if President-elect Donald Trump enacts the policies he talked of on the campaign trail.

Following the election, the stock market responded by surging higher. Metals prices, however, headed in the opposite direction initially. Copper declined by nearly 4 percent, its largest intraday loss in five months, reacting to expectations that Trump’s administration could favor policies that promote economic growth at the cost of the red metal. Copper, which factors heavily into the green energy transition, lost value in response to concerns that the president-elect could roll back subsidies for electric vehicles and renewable energy projects.

Zinc, which is used to galvanize steel, also declined in price, driven by fears that Trump’s promised tariffs could reduce demand for steel from China.

Metals traders also were anticipating the strengthening dollar and potential inflationary pressures from Trump's promised tariffs. Trump has proposed tariffs of 60 percent on Chinese goods entering the U.S., 25 percent to 100 percent tariffs on Mexican imports and 10 percent to 20 percent universal tariffs. While BlackRock says the tariffs are likely to be an early priority, implementation is uncertain.

“This protectionist stance could reinforce geopolitical and economic fragmentation, a structural factor we see keeping inflation higher in the medium term,” says BlackRock, a provider of risk management, investment and advisory solutions.

"Only time will tell how these policies, if enacted, will play out.”

The Tax Foundation says that while the protected U.S. businesses could grow because of the proposed tariffs, they are not necessarily low-cost producers, which could result in less efficient production, leading to reduced economic output and lower incomes over the long run.

“Tariffs could have an inflationary impact or cause an economic downturn in the short run, depending on whether the Federal Reserve takes action to loosen policy and accommodate the tax increase,” the Tax Foundation says. “But no matter whether the short-term adjustment involves inflation or temporarily heightened unemployment, the long-run adjustment to tariffs involves lower incomes and production.”

That’s before taking into account retaliatory tariffs, which reduce how much U.S. companies sell abroad, lowering incomes and shrinking output further, according to the Tax Foundation. “Estimates from Warwick McKibbin et al. of the Peterson Institution for International Economics suggest retaliation could more than double the economic losses from U.S.-imposed tariffs,” the organization says.

Only time will tell how these policies, if enacted, will play out. But if recyclers and consumers of recycled materials thought the election would deliver certainty, I don’t think it has.