This story reflects the views of this author, but not necessarily the editorial position of Fast Company.
Even before he took office, Donald Trump was busily reshaping U.S. industry. Few who’d followed his Twitter account over the course of the election could’ve been shocked to see Trump inveigh against GM, just days after New Year’s, for plans to open a manufacturing plant for its Chevy Cruze in Mexico–no matter that that was more a symbolic defense of domestic manufacturing than a substantive one.
What was a little surprising, by comparison, was the auto industry’s response. After canceling the $1.6 billion plant across the border, GM CEO Mary Barra hit the press circuit to declare that “we have more in common with the administration and the President-elect than we have at odds.” Ford CEO Mark Fields likewise voiced enthusiasm for “a more positive U.S. manufacturing business environment under President-elect Trump and some of the pro-growth policies that he said he is going to pursue.”
No big corporation–or really any business, regardless its size–wants open warfare with the federal government, so comments like these are understandable. But in many ways they’re wrong.
In his inaugural address Donald Trump pledged to restore the glory of American enterprise, echoing broad commitments he’d made throughout the campaign. Trump has ridden into the White House on his image as a successful businessman and an outsider who can single-handedly fire up the economy. But if there were any doubt that President Trump’s approach to business isn’t actually “pro-growth,” his first week in the Oval Office has put it to rest. Here’s why.
Trump dashed hopes that he would take a more moderate path by tweeting “alternative facts” about millions of allegedly fraudulent ballots and issuing executive orders to cancel American involvement in the Trans-Pacific Partnership, renegotiate NAFTA, and repeal Obamacare. He’s also cleared the way for the Keystone XL pipeline, and build a wall along the Mexican border. It wasn’t long ago that some pundits were suggesting that the more outrageous of Candidate Trump’s proposals would soon prove mere rhetorical flourishes, not President Trump’s actual policies.
Just seven days after his swearing in, markets are taking note. Not the Dow, of course, which is up quite a bit thanks to what one economist rightly characterizes as investor optimism for all those “pro-growth” policies. But that optimism may reflect the short-term interests of publicly traded companies better than it does the longer-term prospects for the U.S. economy overall.
And now that it’s clear Trump means what he’s said quite literally, the dollar hit a seven-week low, and the price of gold is climbing amid threats of protectionism and widespread domestic protests.
As a business owner and business advocate, I’m highly sensitive to how surprises can weigh on my ability to lead and execute. Procurement orders arriving on time, employees showing up to work, and a predictable tax bill are just a few of the factors companies rely on in order to grow.
Even Barra, sounding hopeful a few weeks ago, seemed to plead for “people needing to understand [that the auto industry] is a very complex business with long lead times,” which she pointed out are often measured in years–not the seconds that it took Trump to tweet misleading information about her company, and send its stock tumbling as a result.
In a 2012 Gallup poll, 73% of business owners cited a predictable operating environment as crucial to making capital investments, and there’s no reason to imagine they’ve changed their minds about that in 2017. Uncertainty is still bad for business.
So when the President injects himself into corporate negotiations and threatens companies like Toyota, whose shares lost $1.2 billion in value in five minutes after an angry Trump tweet, markets get rattled. Business owners and investors get more cautious. And sometimes, they’re led to make decisions to resolve complications that are more about smoothing the political waters than they are about growing their businesses: Toyota just this week announced plans to build an Indiana factory that it hopes Trump will look upon approvingly.
And as for that big stock market rally this week, it’s too early to tell if this growth will be sustained. In an unpredictable environment like the one we’re heading into, there will be peaks and there will be valleys, but it’s the increasing scale of the ups and downs taken together that spell trouble.
Despite a notable reluctance to share his personal tax returns, President Trump’s plan to cut the corporate tax rate to 15% is one move many business owners could champion. Even though analysts believe 92% of all businesses most likely won’t see any tax savings through this reduction, there may still be reason to hope it’ll spur new investment, plus repatriate corporate revenue being shielded in offshore havens.
But any economic upsides on that end might be canceled out by Trump’s harsh anti-immigration stance, which could wreak havoc on American businesses. By one estimate, immigrant-owned businesses targeted by such policies are responsible for $775 billion in annual GDP. After his first week in office, Trump has made clear he plans to follow through on his immigration crackdown. His administration is already drafting executive orders to cut federal funding to “sanctuary cities” that protect undocumented immigrants and bar entry to refugees from war zones and Muslim-majority countries.
These positions also threaten Silicon Valley, where 74% of computer and mathematical workers ages 24–44 come from abroad. Imposing tighter restrictions on H-1B visas, which Trump’s team has said it’s considering, adds to the uncertainty and is likely already curbing the productivity of millions of immigrants who work and study here.
Small businesses are responsible for employing over 8 million Americans and generating 54% of all domestic sales, according to the U.S. Small Business Administration. Trump advocates rolling back regulations to stimulate growth, but even this “pro-growth” policy for Main Street shops may wind up causing more harm than help.
Under the Obama Administration, Congress passed the Dodd-Frank Act, a landmark regulation that curtailed risky trading behavior by big banks, cracked down on predatory lending, and lowered credit card processing fees. President Trump has sworn he’d kill the regulation as a means of unleashing new growth for the financial industry, but research by my company suggests that doing so could cost Main Street retailers savings of $9.4 billion per year in credit card processing fees alone.
Trump’s policies will create workforce disruptions, monetary volatility, and uncertainty for businesses large and small. However, small businesses will be far less equipped to absorb these shocks than a big automaker like Ford or GM.
While I’ve no doubt that President Trump, on balance, is bad for business, I’m cautiously optimistic about the resilience of American industry despite the threats he poses to it. Mary Barra isn’t wrong to point out that simplifying the tax code could boost the economy. I can also see the potential value of encouraging more capital spending.
But the prospective upsides of Trump’s policies are eclipsed by the disadvantages of having direct interference from an unpredictable, protectionist White House. Judging by the past week, if businesses pretend they have more to gain than lose by adapting to Trump’s world, the next four years may disappoint.
One week down, 207 to go.
Hiro Taylor is the founder and CEO of HeroPay, which helps merchants navigate the complex world of credit card processing, and the former Visa Country Manager of Myanmar.