So much for rational markets: there’s been an awful lot of cherry-picking and wilful blindness on the part of American business (and for that matter their counterparts elsewhere in the world) about Donald Trump. But the grim reality that he is going to be bad for business is taking hold, as he proves to be as distractable and uncontrollable as he was during his campaign, and pursuing exactly the policies he promised he would.
The Dow has returned about 8% since his election victory, the S&P 500 index is up more than 6%, and the Nasdaq Composite Index has risen more than 7% during that period. In Australia, the market peaked at 5807 on January 9 (it bounced half a per cent yesterday in a relief rally after Trump took action to free up the bitterly opposed Keystone XL and Dakota Access oil pipeline projects), but the market is up more than 8% since Trump’s election. Corporate leaders, from the opportunistic Australian Andrew Liveris of Dow Chemical (who campaigned for Hillary Clinton but is now a supporter of Trump) to auto company bosses and the CEOs of healthcare companies, especially insurers, have queued up to truckle to the new president.
That’s based on some selective deafness about his policies: Trump’s spruiking of a trillion-dollar infrastructure plan and big corporate tax cuts (talk about prosecuting the interests of the forgotten white working class — cutting multinationals’ taxes will show ’em!) has attracted the attention and support of previously sceptical US business. The tax cut and a one-off low tax rate on earnings and cash offshore will generate a cascade of cash for businesses, especially the S&P 500 and big privately owned groups such as Cargill and Koch Industries. But that will only be a one-off benefit, and many companies will be forced to sell their holdings of US debt (Treasury notes) or incur huge costs by moving them from Ireland, Belgium or the Cayman Islands back to US. But on the upside, business leaders know this one-off deal will boost their bonuses and the value of the options and share rights, making them wealthier.
Ironically, that prompted a surge in the US dollar’s surge, meaning American exporters and other companies face lower earnings (and growth) in the March quarter (we will find that out from April onwards).
But while American business was preoccupied with the goodies Trump was promising them, he was capturing them. No one will dare take a stand contrary to Trump’s, especially on free trade or jobs, meaning now that US business is the prisoner of a volatile man with no experience of international trade, and someone whose business record is littered with six bankruptcies of businesses (especially casinos) and the non-payment of debts to contractors, especially among small businesses. The penny has started to drop as Trump promised a new era of protectionism in his inaugural, dumped the TPP (which was good for US corporations, if not for consumers and workers anywhere) and threatened punitive tariffs on US businesses that dared to locate their operations to cheaper foreign locations.
Trump’s focus is on manufacturing, but he has missed the crucial point. US manufacturing output is up 20% since 2000, but jobs are down by a third to around 12 million. How does that compute? Much of the boost to output has come as a result of automation in cars, technology and other sectors. Automation is spreading through the service sector, especially warehouses of the type owned by Disruptor-in-Chief Amazon. Amazon’s CEO Jeff Bezos, by the way, has had to very publicly reverse course on his previous strong criticism of Trump, who in turn had threatened to go after Amazon (La Donald is only pro-business if they support him, it seems. Bezos, not coincidentally, owns The Washington Post).
In the past 10 days, the blindfolds have started to come off, and some in the markets want to see the Trump policies and rules on issues such as tax before talking up his ideas. The Dow has fallen back from the verge of topping the 20,000 level to struggling to stay above 19,800. Mark Grant, chief strategist of Hilltop Securities, put it in a note last week, reported by Marketwatch:
“In my almost 43 years on Wall Street, I am not sure that I have ever seen so much consternation than at present. It is not just differences of opinion but it is a quite real fear of the unknown, I suppose. People just don’t know what they are getting into or where the country is heading.”
Ditto locally. “As week one in office gets underway, there is a growing sense of scepticism, not helped by the tone of Friday’s inaugural address and subsequent spat with the media,” ANZ analysts said in a note on Tuesday.
The uncertainty of a volatile, thin-skinned and vindictive president with the most inexperienced cabinet in generations — and the protectionist straitjacket he wants to lock US business in — has become apparent.
Good piece. Inevitably, Trump will play favourites. When he does, the business dominoes will start to fall in America. As for world trade, the picture is looking very similar to the 1930’s. Scary stuff. Protectionist walls, tit for tat economic sanctions, then of course, there is Trump’s bellicose language toward China, while seemingly embracing (or is that being played by) Putin’s Russia. If Trump forsakes Europe and allows some sort of new Warsaw Pact to emerge while playing dangerous games with Beijing, we have much to worry about.
It’s not just “business” – he is one of them?
I cannot understand this suspension of it’s usual selective cynicism and scepticism in favour of credulity by much of our media, suggesting Trump could change – after 70 years – calling this?
As if afraid to be the odd one out calling Trump for what he is and always has been? With a trail of disappointment, bordering on destruction, going back years – for almost anyone else to see.
Of course he’s essentially a Republican/GOP, surrounding himself with capital C Capitalists/achievers, “conservative” – the equivalent of our Limited News Party – and all, but still …..?
Where is Rupert in all this?
We’ll have to wait for Donald to bend over, to see …..
His rags have been trying to persuade us how benign his very own GOP Donald will be.
Rupes has Fox News , which has Hannity and O’Reilly ; both big DT fans.
Rupes had to turf the old Fox boss to placate the kids but RA is advising DT recently and Rupes and Rodg are still good buddies, DT’s stacked his team with loyal Kochsuckers who Rupes would be well acquainted with and while he hedged his bets early in the piece , Rupes is well and truly on board Trump-wise now.
Rupert definitely has a digit in this poo-pie.
Who ever said Trump was a businessman? He is a pure rentier parasite. Never created anything even vaguely commercial in his life.
Agree wholeheartdly.
So Big Business and Wall Street and associated globalists and internationalists are starting to sweat as they realise that Donald Trump may deliver on some his election promises to put the interests of American workers and small business first and to withdraw in part at least from the World Police program.
Yet despite this promising development we are warned that Donald Trump is a danger to everyone.
The confusion on the ‘progressive’ side of politics has never been clearer. They complain about all of the fables and myths of neoliberalism – including free (not fair) trade and unrestrained speculative (unproductive) capital flows and US Imperialism – and yet when someone actual looks like doing something about them – they complain as well.
The sad part of the rise of the Trump is that he was elected because he is considered more likely to delivery on policies that should have been delivered by Obama and extended by Hillary.
We can only hope that the DNC and the ALP and Greens learn from the US Election and pinch some of the economic policies that won Trump the presidency before someone like Hanson and Bernardi do. But as is so often the case they will move only after losing another string of elections.
Fair Trade not Free Trade
Competitive Markets not Free Markets
Productive capital flows not Free Capital Flows.
How will corporate tax cuts and undoing the very limited regulatory proposals for the financial sector post 2008 deliver benefits to American workers and small business? How will his fixation on manufacturing- with its ever shrinking labour force- deliver benefits to American workers, most of whom work in the service sector? Do you honestly believe he would – let alone could- “bring the jobs back from Gina”? Can you see anybody in the corporate capitalist world allowing that?
I wish I could share your optimism, but I don’t actually see Trump doing anything. I heard him say a lot, he still says a lot, but talk is cheap. The previous US President talked a lot about peace- even won a Nobel Peace Prize for his pretty rhetoric- but he dropped more than 26,000 on 8 different countries in 2016 alone, and that’s not counting the drone strikes.
I’ll believe Trump’s pledge to put American workers first, bring back the jobs and make America great again when he actually DOES something, like implement an infrastructure program that actually benefits ordinary Americans. Perhaps an employment program. A public housing program wouldn’t go astray either. Neither would a public health care program – but he’s actually hellbent on undoing the closest his country ever got to one, and it was a half arsed, token thing to begin with. Investment in public education would help, too- but he’s already talking about the “failing public schools” and his support and preference for private sector for profit schools.
( Make Americ great again? From a social and economic equity point of view the US was never great. It’s always been backward. Hamstrung by its unbridled capitalism and crazy fixation with “freedom” )