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.
Burn It Down, Rex
Since the beginning of this nightmare administration, we’ve been assured — via well-placed anonymous sources — that a few sober, trustworthy people in the White House were checking Donald Trump’s worst instincts and most erratic whims. A collection of generals, New York finance types and institution-minded Republicans were said to be nobly sacrificing their reputations and serving a disgraceful president for the good of the country. Through strategic leaks they presented themselves as guardians of American democracy rather than collaborators in its undoing.
.. Last August, after the president said there were “very fine people” among the white supremacist marchers in Charlottesville, Va., senior officials rationalized their continued role in the administration to Mike Allen of Axios. “If they weren’t there, they say, we would have a trade war with China, massive deportations, and a government shutdown to force construction of a Southern wall,”
.. Since then, we’ve had a government shutdown over immigration, albeit a brief one. A trade war appears imminent. Arrests of undocumented immigrants — particularly those without criminal records — have continued to surge.
.. Over the past 14 months we’ve also seen monstrous levels of corruption and chaos, a plummeting of America’s standing in the world and the obliteration of a host of democratic norms. Yet things could always be worse; the economy is doing well and Trump has not yet started any real wars.
The former Deputy National Security Adviser
- Dina Powell left in January.
- Gary Cohn, head of the National Economic Council, announced his resignation on March 6. Secretary of State
- Rex Tillerson was terminated by tweet on Tuesday. National Security Adviser
- H. R. McMaster will reportedly be among the next to go, and Trump may soon fire Attorney General
- Jeff Sessions, possibly as a prelude to shutting down the special counsel Robert Mueller’s investigation.
Adding to the tumult, a parade of lesser officials have either quit or been fired, including the White House communications director
- Hope Hicks, staff secretary
- Rob Porter and Trump’s personal aide
- John McEntee.
The self-styled grown-ups are, for the most part, being replaced by lackeys and ideologues. Larry Kudlow, the CNBC pundit Trump has appointed to succeed Cohn, is known for the consistent wrongness of his predictions.
.. John Roberts of Fox News reported that McMaster could be replaced by uberhawk John Bolton, who last month wrote a Wall Street Journal op-ed titled “The Legal Case for Striking North Korea First.” (Bolton has described proposed talks between Trump and Kim Jong-un of North Korea as an opportunity to deliver a harsh ultimatum.)
.. This new stage of unbound Trumpism might make the administration’s first year look stable in comparison. That would partly vindicate the adults’ claims that things would be even messier without them. But it would also mean that by protecting the country from the consequences of an unhinged president, they helped Trump consolidate his power while he learned how to transcend restraints.
Whatever their accomplishments, if from their privileged perches these people saw the president as a dangerous fool in need of babysitting, it’s now time for some of them to say so publicly.
.. That logic, however, only holds for those who remain on decent terms with Trump. Which means that if there’s one person who has no excuse for not speaking out, it’s Tillerson, once one of the most powerful private citizens in America, now humbled and defiled by his time in Trump’s orbit... “Rex is never going to be back in a position where he can have any degree of influence or respect from this president,” my Republican source said. Because of that, the source continued, “Rex is under a moral mandate to do his best to burn it down.” That would mean telling the truth “about how concerned he is about the leadership in the Oval Office, and what underpins those concerns and what he’s seen.”.. patriotism and self-interest point in the same direction... If Tillerson came out and said that the president is unfit, and perhaps even that venal concerns for private gain have influenced his foreign policy, impeachment wouldn’t begin tomorrow, but Trump’s already narrow public support would shrink further... Republican members of Congress like Bob Corker, chairman of the Senate Foreign Relations Committee, might be induced to rediscover their spines and perform proper oversight.
Après Cohn, le Deluge?
Trump’s top economic adviser departs, and the administration’s grown-ups worry.
Mr. Trump’s washing-machine and solar-panel salvo was to be followed by a focus on China’s unfair trade practices, namely intellectual-property theft. The president would announce narrowly targeted trade actions against that country, while holding aluminum and steel tariffs in reserve. All this would be choreographed around renegotiation of the North American and Korea-U.S. free trade agreements.
.. Mr. Ross took advantage of the situation last week to get the president’s ear, and back we were to the days of Mr. Trump spinning out on the advice of the last person in the room.
.. few know that he spent this past weekend talking the president down from an even more Planet Mars idea from Team Ross —to set tariffs closer to 50%.
.. Mr. Ross (a former steel executive) and the nativist Peter Navarro have driven out their biggest free-market opponent, increasing their ability to wreak harm on the economy.
The voices of those who actually understand economic policy are greatly diminished, as evidenced this week by the administration’s endless loop of fact-free and near fantastical claims about the effects of the tariffs.
His shabby treatment has more than a few of the grown-ups now actively considering their own exit plans. It’s one thing to do battle daily; it’s another to watch months of work get flushed on a whim, and get publicly branded a “globalist” to boot. Mr. Cohn’s top deputy, Jeremy Katz, departed just as soon as the tax deal passed, and watch for other Cohn staffers—many of them important free-market voices—to follow.
.. Imagine a Trump presidency without Mr. Kelly, H.R. McMaster, Jim Mattis, Don McGahn, Mick Mulvaney, Kevin Hassett. Consider, too, that no one as good is likely to replace them—now having seen how the White House works.
And don’t forget congressional Republicans, whom Mr. Trump has potentially set up for a midterm rout.
Many are furious that he has forced them to call him out, splitting the party. But they are also legitimately fearful the tariffs will spark trade war and destroy tens or hundreds of thousands of jobs, neutralizing the benefits of the hard-won tax reform.
The economy is the best thing Republicans have going for them in November, and the Trump-Ross-Navarro trio just embraced the only policy that could kill it.
Just how bad it is will depend hugely on Mr. Cohn’s successor.
.. Besides, who in his right mind would even want the job?