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Trump’s Policies: Why China’s Loss Might Not Mean Freeport’s Gain

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Trump’s policies

As we discussed previously, Freeport-McMoRan (FCX) rose handsomely after the US election results. In this part, we’ll see what Trump’s policies could mean for Freeport and other copper miners.

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Infrastructure investment

Originally, Trump said that he intends to spend more than $500 billion—twice what Hillary Clinton was looking to allocate—on the infrastructure sector. Notably, Trump also mentioned infrastructure spending in his acceptance speech. In a Trump presidency, we could see a higher allocation to infrastructure spending. He claimed to be more comfortable with a higher budget deficit. We should note that investments in highways and bridges would boost cement and steel demand and generate some incremental copper demand.

If we see a “doubling” of US economic growth as Trump mentioned in his speeches, US copper demand would get a boost. Since it’s a global commodity, copper’s price is impacted by global dynamics, especially the health of the Chinese economy. China is the largest market for miners (XME) including BHP Billiton (BHP), Rio Tinto (RIO), and Vale (VALE).

Trump’s trade policies

Trump’s tough stance on imports from China could be negative for the Chinese economy. Exports are a key pillar for the Chinese economy. They helped pull millions of people out of poverty in China. China’s growing middle class has been a key driver of global copper demand.

If the US, under a Trump presidency, decides to get tough on Chinese imports, we could see an impact on the Chinese economy. It remains to be seen if the expected increase in US copper demand could balance any fall in Chinese copper demand.

In the next part, we’ll discuss how Trump’s economic policies could impact Freeport.

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