What will Donald Trump as president mean for Norwegian businesses?

Donald Trump's second term as president will also have consequences for Norwegian businesses. During the election campaign, he promised higher tariffs and measures to promote US industry. He also supports an expansionary fiscal policy and is an outspoken opponent of climate investment and international trade regimes.

A key issue in Donald Trump's election campaign has been his plan to impose steep tariffs on imported goods. He has said that he will introduce a 60 per cent tariff on Chinese goods and a tariff of at least 10 per cent on goods from all other countries. If this becomes a reality, it will have major consequences for Norwegian companies. Tariffs on Norwegian goods will force companies to raise their prices, which in turn will reduce US demand for these goods.

In 2023, 8 per cent of Norwegian exports excluding oil, gas and electricity went to the US, with a value of almost NOK 50 billion. This made the US Norway's most important export market outside Europe. Higher US tariffs will therefore affect both individual companies and Norway's overall exports.

The Inflation Reduction Act (IRA), introduced under President Biden, provided tax relief and production incentives for businesses in the US. Trump is an outspoken opponent of the parts of the IRA that support measures to reduce greenhouse gas emissions. At the same time, the IRA creates manufacturing jobs in the US, which is important to the incoming administration. Tax incentives and other financial incentives for US production are therefore likely to remain in place. The combination of incentives to manufacture goods in the US and tariff barriers that make it harder for foreign companies to sell goods there could create dual pressure on foreign businesses for which the US is an important market to move some or all of their production to the US.

Euro area GDP is estimated to fall by 0.5–1.5 per cent as a result of US tariff barriers. This is due both to higher tariffs and the expansionary fiscal policy that the new administration is likely to pursue. As we have seen, high inflation and interest rates often spill over into the Norwegian economy. Persistently high interest rates reduce the amount of private capital available for promising projects.

Norwegian goods are often part of European companies' value chains, so if relations between the EU and the US move closer to a trade war, this will have serious consequences for Norway. As an open economy, Norway will be adversely affected by the risk of a trade war, whether with the EU or other US trading partners.

As a small economy, Norway is far down the queue when it comes to negotiating exemptions with the US and has less bargaining power than a large trading bloc. Norway may also come under pressure to adopt a less desirable stance towards China and other countries in order to secure advantages for Norwegian interests. Remaining outside the EU could have particularly negative consequences if the EU enters into special agreements with the US that do not include Norway. In that case, Norwegian businesses would lose out significantly because we are not part of the EU.

Over time, we have seen EU policymaking move at such a pace that Norway has fallen significantly behind in implementing changes in its own legislation. Trump’s policies will almost certainly prompt a policy response from the EU. The EU’s ability to respond quickly puts considerable pressure on Norway. In addition to legislation, the EU may well adopt financial packages that Norway will need to decide whether to help fund. Delays in implementing legislation, and potentially remaining outside EU packages, will have a negative impact on Norwegian businesses.

Under Trump, US energy policy will move away from renewable energy subsidies – but green energy development in the US has gained momentum and will probably be impossible to slow down. Solar, wind and batteries account for more than 90 per cent of the capacity being added to the US power grid in 2024. In Houston, the energy capital of the US, the oil and renewable energy industries are growing side by side because both are profitable. New funds are investing billions of dollars in renewable energy in Houston. Consulting firms are establishing decarbonisation centres in Houston at a cost of hundreds of millions of dollars. And we are strengthening our office in Houston. 

This momentum will not be halted by the withdrawal of subsidies. Energy production will only increase under Trump 2.0 – including renewable energy. This creates opportunities for Norwegian energy companies in both fossil fuels and renewables.

We will continue to monitor developments closely and advise Norwegian companies on how best to navigate this new political landscape.