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The election of Donald Trump as the next US president poses a major risk to restaurants and retailers, according to Morgan Stanley analysts.
The biggest risk to the industry would be the loss of millions of consumers as a result of Trump’s proposed immigration reforms, the analysts wrote in note in September.
As part of his immigration plan, the Republican presidential candidate has said he would deport millions of undocumented immigrants.
Deporting those immigrants – estimated to include 5 million to 10 million people – would eradicate a vital group of low-end consumers and low-wage workers from the country.
“We see Trump’s immigration policy as the biggest risk, largely because of thesignificant impact that deportation could have on consumer demand and labor,” the analysts wrote.
Some of Trump’s proposed policies, including income tax reductions, could have a positive effect on the economy by putting more money in the pockets of some consumers. His proposed corporate-tax reductions could also benefit restaurants and retailers.
But the analysts said it’s unclear whether Trump will be able to implement those policies.
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Even if he succeeds with implementation, the risks associated with his immigration reforms would cancel out any potential advantages, they wrote.
“The policies proposed by Trump would theoretically support an increase in high-income consumer spending, but elevated economic policy uncertainty, as well as a possible deportation-linked decline in consumer demand and labor under a Trump presidency would counteract the consumer spending benefit from lower taxes,” Morgan Stanley US consumer economist Paula Campbell Roberts wrote.
Morgan Stanley identified Jack-in-the-Box, El Pollo Loco, and Wingstop as among the restaurants that would be hurt the most by a Trump presidency.
That’s likely why the fast-food industry didn’t give much money to the Trump campaign.