donald trump <u+2019>s fiscal splurge will revive the flagging confidence of u.s. consumers, and with it the global car industry. or, mr. trump<u+2019>s isolationist stance on trade will hit the global car industry and its complex international supply chain. both statements are defensible reactions to this week<u+2019>s u.s. election result . but they lead to radically different conclusions. this is the essential dilemma investors are likely to grapple with for the coming months<u+2014>and not just in the auto sector. markets have taken mr. trump<u+2019>s pre-election talk of tax cuts and infrastructure spending to herald the kind of fiscal stimulus many economists have long seen as the answer to the world<u+2019>s sluggish economic growth. for all its irony<u+2014>and the opposition of fiscal hawks in congress<u+2014>this outcome is likely to be popular, and mr. trump has a mandate to deliver it. car sales are an obvious beneficiary. at the same time, the car industry is dependent on international trade deals attacked by the president-elect. ford motors , the company singled out by mr. trump , isn<u+2019>t the only one making major investments in mexican manufacturing. general motors and fiat chrysler both currently make more cars in mexico than ford. and, as ubs notes, bmw and daimler<u+2019>s mercedes<u+2014>which currently make all their north american cars in the u.s.<u+2014>are now investing heavily in mexican factories. bmw<u+2019>s $1 billion new factory in san luis potosi will make up to 7% of the company<u+2019>s current global production when it opens in 2019. another irony of the election result is that in the short term it has made mexican factories even more efficient: the peso is still down about 8% against the dollar since mr. trump<u+2019>s victory. there is a parallel here with britain<u+2019>s vote in june to leave the european union. for all the worrying about trade barriers, so far the main consequence of brexit has been to devalue the pound and thus make bmw<u+2019>s mini and rolls-royce plants in the u.k. more competitive. however, the peso will have to fall far further to make up for the 35% import tariff mr. trump has threatened to slap on mexican car imports. so investors are left speculating just how far the reality of the president-elect will match the rhetoric. the president<u+2019>s luxurious personal tastes<u+2014>he is known to be a fan of rolls-royce, which manufactures exclusively in southern england<u+2014>could point to a more nuanced approach than the one broadcast across the american rust belt. which will win out: fiscal boost or protectionism? u.s. auto stocks have risen strongly since tuesday, suggesting investors for now think the former. but stray words from the president-elect could swing the balance of sentiment either way. it would be rash to think markets<u+2019> current calm is definitive.
making america spend again versus isolationism  - wsj
stephen wilmot