Tesla jumps 18% on Trump 2.0, however will the brand new president ditch help for wind, photo voltaic and EVs?

With Donald Trump decisively defeating Democratic candidate Kamala Harris to take the White House, there will be business winners and losers. 

Among the key economic losers under Trump are likely to be clean energy firms, with the result of the presidential race set to deliver reduced commitment to the renewables sector.

There has been a mixed reaction from markets. Elon Musk’s Tesla has surged 18 per cent on the back of the ‘Trump trade’, while First Solar dropped 10 per cent. 

Kamala Harris was undoubtedly the greener of the two candidates.

Tom Sosnoff, chief executive of financial network Tastylive, said: ‘Trump has been vocal about his scepticism of global warming and climate change.’

Speaking last month in the wake of Hurricane Helene, Trump said ‘Do you ever notice, this was such a big deal, the environmental stuff… it’s one of the greatest scams of all time… people aren’t buying it anymore.’

Helene was the strongest hurricane to hit Florida’s Big Bend area since 1851, leaving more than 100 dead in its wake.

Trump expressed his views on climate issues earlier in the year, with the Republican candidate saying in July: ‘All of the trillions of dollars that are sitting there not yet spent, we will redirect that money for important projects like roads, bridges, dams, and we will not allow it to be spent on meaningless green new scam ideas.’

Trump, it appears could prove positive for traditional energy sectors.

Morgane Delledonne, head of investment strategy at Global X ETFs Europe, told This is Money: ‘Trump’s campaign emphasises a return to fossil fuels, highlighting the U.S.’s vast oil reserves and linking energy prices to inflation. 

‘This could lead to reduced federal support for renewables like wind, solar, and EVs, with likely rollbacks on tax incentives and emissions regulations with a possible total repeal of the Inflation Reduction Act under a Republican sweep.’

However, Justin Onuekwusi, chief investment officer at St. James’s Place, points out that traditional energy sources outperformed under Biden as a result of external geopolitical forces. 

He said: ‘It’s so important not to predict the reaction of sectors based on the politics, because it’s not just the politics which can drive the market. What ultimately drives the market is earnings. The thing that impacts earnings can be policy, but there’s lots of other exogenous factors that can do that.’

Will Trump repeal the Inflation Reduction Act? 

The Inflation Reduction Act, passed under Joe Biden, included $375billion in climate incentives which could cut the US’ emissions by two fifths by 2030, including electricity emissions by 80 per cent.

However, with Trump now President, there is a possibility that the act could be repealed if he makes a clean sweep. This could prove difficult for firms in the clean energy sector.

A repeal, Rahul Bhushan, managing director of Ark Invest Europe, said: ‘could introduce immediate headwinds for clean energy projects, as the Act’s financial incentives are crucial to many companies’ plans for scaling and innovation.

‘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 stall expansions and cut into the projected returns on their investments.’

Similarly, Sosnoff warns: ‘Clean energy firms dependent on government subsidies to enhance competitiveness may face reduced market presence [in the case of a full repeal], and firms focusing on clean technologies risk financial viability without statutory support, negatively affecting market confidence in renewables.’

Bhushan, however, also argues that a repeal would face major obstacles, especially with the Biden administration having already pushed to allocate 90 per cent of IRA funds by the end of the 2024 financial year.

‘The probability of a complete repeal is low,’ he said.

China set to face heavy tariffs 

Trump is more supportive of traditional forms of energy. ‘Drill, baby, drill,’ the new President was chanting on the campaign trail, promising to push oil and gas production.

The country produced 13.4 million barrels of oil per day in August, a record high.

In spite of Trump’s oil-slicked rhetoric, the new Republican administration is unlikely to see a total shift away from renewables.

It is nuclear power, though, that is more likely to be the main benefactor now that Trump is returning to power.

‘Trump has shown openness to nuclear as part of an independent energy mix, which could lead to investments in new technologies like small modular reactors (SMRs),’ Delledone told This is Money.

She added: ‘His administration may streamline regulatory processes, making it easier for new nuclear projects to move forward. However, without targeted subsidies, nuclear may still compete with natural gas and renewables for investment.’

According to Bhushan, a key driver of Trump’s is the energy security offered by Nuclear as a source of energy.

He said: ‘With Trump’s favour toward nuclear and natural gas, firms in these areas could experience a boost, particularly as nuclear power gains renewed focus as a reliable, low-emission energy source.

‘This diversity could offer a balanced energy strategy that includes a stronger emphasis on American energy independence.’

This could also benefit other parts of the renewables sector, however, with wind and solar investment both increasing energy security.

According to Seb Beloe, head of research at WHEB Asset Management, this is where domestic firms could see benefit under Trump.

He said: ‘We would expect US-based businesses to benefit in either scenario. We think FirstSolar as a the only major US-listed solar module manufacturer to be best placed given its domestic manufacturing footprint and US base. 

Chinese companies are likely to be increasingly shut out of the US market under the Trump presidency.’

Daniel Lurch, portfolio manager of the Green Planet fund at J. Safra Sarasin Sustainable Asset Management, said: ‘During his campaign, Trump has spoken a lot about tariffs. Under his leadership, there could be an elevated risk of tariffs on clean energy imports, particularly on solar and storage equipment from China. 

‘This is not new, as both Democratic and Republican administrations have utilised and expanded tariffs. 

‘For example, recall that Trump already implemented a 30 per cent tariff on imported solar cells under Section 201, which Biden extended at 15 per cent. 

‘We believe that any new tariffs will incentivise developers to further onshore and boost their supply chains, which should benefit domestic manufacturers of solar and storage equipment..