How should business leaders interpret Donald Trump’s tweets? That question is haunting many corporate boards, in America and around the world.
How should business leaders interpret Donald Trump’s tweets? That question is haunting many corporate boards, in America and around the world.
Weary executives could be forgiven for feeling that they are living in a Tale of Two Trumps. In one part of the incoming administration, life seems rational: the president-elect’s economic transition team is developing a pro-growth, seemingly pro-business plan, with proposals to cut corporate taxes, incentivise investment, unleash infrastructure spending and slash red tape.
Economic liberals will hate this. But there is an internal logic to these supply-side economic ideas that reflects the intellectual legacy of Bush-era politicians such as the late Jack Kemp. Little wonder that stock markets are soaring and executives such as Jamie Dimon of JPMorgan Chase, Blackstone’s Stephen Schwarzman and Mary Barra of General Motors have joined Trump’s business advisory council.
But in a second part of Trump-land, logic has disappeared, replaced by capricious demagoguery and a corporate witch-hunt. Nevermind the fact that Mr Trump has threatened to slap 35 per cent tariffs on companies that shift factories overseas, rewrite the North American Free Trade Agreement and impose penalties on Chinese imports.
More concerning is his attack on specific corporate names. Last week it was Carrier, an air conditioner maker which is shifting some production to Mexico. This week Boeing was in the frame as Mr Trump claimed it was putting a “$4bn” price tag on the next presidential plane (a number which seems plucked out of thin air). This has left executives wondering who will “bear our turn in the bullseye” next, as Doug Oberhelman, head of Caterpillar puts it. It is tantamount to trial by tweet.
What should executives do? One way to respond is to heed the advice of Michael Bloomberg, former mayor of New York, and focus on what Mr Trump actually does. As Mr Bloomberg said this week, Mr Trump has “been on both sides of every issue”- and often backtracks as fast as he attacks.
Nervous executives can thus console themselves by interpreting the tweets as a piece of populist flag-waving, designed to distract the media’s attention from other issues. I suspect another crucial factor is that Mr Trump is trying to assert his authority in an unfamiliar new landscape. This is the political equivalent of a dog peeing on lampposts in order to mark territory.
The second way to frame the tweet attacks is to compare Mr Trump’s threats with his presidential powers. According to Washington lawyers - who are now frantically scouring statute books to determine what Mr Trump could or could not actually do in the White House - there are some areas where he could turn his threats into action with relative ease.
If President Trump actually wanted to take America out of Nafta, for example, he could do that by decree, with six months’ notice. Lawyers privately say he could also block Chinese foreign direct investments, use a 1974 Trade Act to impose a 15 per cent rise on Chinese imports for up to 150 days, or use the 1977 International Emergency Economic Powers Act to slap tariffs on specific products or product sectors.
But if Mr Trump wants to renegotiate Nafta or any trade deal (rather than withdraw) he needs Congressional approval. If he wants to brand China a currency manipulator, he needs to use a specific Treasury procedure (which probably could not be applied at present).
And while Mr Trump can easily slap tariffs on product sectors, there is nothing in statute books that lets him target individual companies with similar ease. And tariffs might not hit the companies that trigger his ire. Data from the Bureau of Economic and Business Affairs show that just 6 per cent of goods made by American-owned factories in China actually enter US markets. For Mexico the ratio is 25 per cent.
A cynic might say the legal arguments are sadly irrelevant, given that Mr Trump’s rhetoric suggests he has limited respect for the rule of law. That is why his critics mutter about populist demagoguery. But if Mr Bloomberg is correct in his analysis - as I suspect he is - then the moral for executives is clear: business leaders need to note Mr Trump’s tweets; but they need to pay more attention to what (if anything) he actually does.
That might sound alarming. But to cheer yourself up try visualising a dog and a lamppost - and remember that politics is a territorial game, which Mr Trump clearly believes is best won by creating a stink.
