American executives are betting that the president is good for business. Not in the long run
MOST American elites believe that the Trump presidency is hurting their country. Foreign-policy mandarins are terrified that security alliances are being wrecked. Fiscal experts warn that borrowing is spiralling out of control. Scientists deplore the rejection of climate change. And some legal experts warn of a looming constitutional crisis.
.. Bosses reckon that the value of tax cuts, deregulation and potential trade concessions from China outweighs the hazy costs of weaker institutions and trade wars.
.. the investment surge is unlike any before—it is skewed towards tech giants, not firms with factories. When it comes to gauging the full costs of Mr Trump, America Inc is being short-sighted and sloppy.
.. The benefits for business of Mr Trump are clear, then: less tax and red tape, potential trade gains and a 6-8% uplift in earnings.
.. During the Obama years corporate America was convinced it was under siege when in fact, judged by the numbers, it was in a golden era, with average profits 31% above long-term levels.
Now bosses think they have entered a nirvana, when the reality is that the country’s system of commerce is lurching away from rules, openness and multilateral treaties towards arbitrariness, insularity and transient deals.
.. so far this month 200-odd listed American firms have discussed the financial impact of tariffs on their calls with investors. Over time, a mesh of distortions will build up.
.. American firms have $8trn of capital sunk abroad; foreign firms have $7trn in America; and there have been 15,000 inbound deals since 2008. The cost involved in monitoring all this activity could ultimately be vast. As America eschews global co-operation, its firms will also face more duplicative regulation abroad. Europe has already introduced new regimes this year for financial instruments and data.
.. The expense of re-regulating trade could even exceed the benefits of deregulation at home. That might be tolerable, were it not for the other big cost of the Trump era: unpredictability. At home the corporate-tax cuts will partly expire after 2022.
.. Bosses hope that the belligerence on trade is a ploy borrowed from “The Apprentice”, and that stable agreements will emerge. But imagine that America stitches up a deal with China and the bilateral trade deficit then fails to shrink, or Chinese firms cease buying American high-tech components as they become self-sufficient
.. Another reason for the growing unpredictability is Mr Trump’s urge to show off his power with acts of pure political discretion.
- He has just asked the postal service to raise delivery prices for Amazon, his bête noire and the world’s second-most valuable listed firm.
- He could easily strike out in anger at other Silicon Valley firms—after all, they increasingly control the flow of political information.
- He wants the fate of ZTE, a Chinese telecoms firm banned in America for sanctions violations, to turn on his personal whim.
.. When policy becomes a rolling negotiation, lobbying explodes. The less predictable business environment that results will raise the cost of capital.
.. Mr Trump expects wages to rise, but 85% of firms in the S&P 500 are forecast to expand margins by 2019
.. Either shareholders, or workers and Mr Trump, are going to be disappointed.
.. In a downturn, American business may find that its fabled flexibility has been compromised because the politics of firing workers and slashing costs has become toxic.
.. American business may one day conclude that this was the moment when it booked all the benefits of the Trump era, while failing to account properly for the costs.
Most attention on this issue has focused on Iran, because countering Tehran’s growing regional power—particularly as the war in Syria winds down, and with Iran and its allies gaining control of key strategic areas along the Syrian-Iraqi border—is uppermost in the minds of Saudis and Israelis alike. Both also feel keenly menaced by Iran’s most effective Arab proxy, Hezbollah, which has emerged from the Syrian war much more powerful than before
.. The traditional assumption has been that the Palestinian cause benefits from a zero-sum attitude toward Israel by the Arab states that, at a minimum, demands a complete end to the occupation that began in 1967
.. There’s still a strong sense of betrayal about Egypt’s separate peace with Israel in 1979; there’s somewhat more understanding about why Jordan undertook a similar treaty with Israel following the Israeli-Palestinian Oslo Accords.
.. The Arab Peace Initiative, launched by Riyadh in 2002 and subsequently endorsed by both the Arab League and the Organization of Islamic Cooperation, initially held out full diplomatic and trade normalization for Israel with virtually the entire Arab and Muslim worlds as a major additional benefit to be acquired upon the conclusion of a peace agreement with the Palestinians.
.. The Arab, and especially Saudi, position appears to have evolved lately to accept the virtue of “concurrence,” whereby limited Israeli peace moves and concessions toward the Palestinians, such as restricting settlements in the occupied territories, would be matched by concomitant limited Gulf Arab gestures toward Israel
.. It’s unlikely that many Palestinians share the degree of alarm that Israelis and Saudis feel about the growth of Iranian power in the Middle East, and particularly the emergence of an Iranian-controlled “land bridge” between Tehran and Lebanon and its Mediterranean coast. Yet this is a strategic game changer
Angela Merkel has served formal notice that she will lead the German wandering away from the American alliance.
.. The Soviet Union offered to withdraw the troops that then occupied eastern Germany and to end its rule over the occupied zone. Germany would be reunited under a constitution that allowed the country freedom to choose its own social system. Germany would even be allowed to rebuild its military, and all Germans except those convicted of war crimes would regain their political rights. In return, the Allied troops in western Germany would also be withdrawn—and reunited Germany would be forbidden to join the new NATO alliance.
.. Again and again through the Cold War they would probe for ways to split Germany from the West, and especially from the United States. They probably came closest in the early 1980s, when millions of Germans marched in the streets against NATO nuclear missile deployments
.. it was the George W. Bush-Gerhard Schroeder split over the Iraq war in 2003 that definitively ended German deference to American leadership.
.. Merkel ignored Obama’s pleas to reflate the German economy after the financial crisis of 2008 and the euro crisis of 2010. The Snowden revelations—including exaggerated claims that the United States had tapped Merkel’s ubiquitous personal cellphone—poisoned the mood even more deeply.
.. Since the war, German politics has been founded on two fundamental commitments: to liberalism at home; to Atlanticism abroad.
.. So long as the Germans most hostile to the U.S. alliance espoused various shades of fascism and communism, then the mighty German middle would cling determinedly to the U.S. alliance as a bulwark of stability and liberalism.
.. Polls show that German confidence in the United States, already lowered under Obama, has collapsed under Trump to a level barely better than Putin’s Russia.
.. Join those words to Trump’s ostentatious refusal to endorse NATO’s famous Article 5, the guarantee of mutual defense, at the NATO summit, and it’s hard to imagine that the messaging of Trump’s first trip could have been more perfect for Vladimir Putin if he’d written the script himself.
Supreme Leader Ayatollah Ali Khamenei, speaking at an event marking the first day of Ramadan, accused Saudi Arabia of trading its wealth with “pagans and enemies,” according to the semi-official Fars news agency.
“The stupid Saudi government thinks it can attract the friendship of enemies by giving them money,” he said.
Khamenei added that Saudi Arabia’s rulers faced “certain downfall” for aligning itself with the U.S, Reuters reported.
“They act cordially towards the enemies of Islam while having the opposite behavior towards the Muslim people of Bahrain and Yemen,” he said. “They will face certain downfall.”