ALTHOUGH he styles himself as a chief executive who can turn the country around, Donald Trump is an outsider in the world of American business. His commercial operation is tiny by the standards of the country’s mega-firms and few of their bosses have ever viewed the president-elect as an equal or ally. He has “no friends” among the business elite, sniffed a private-equity baron a few weeks ago, who will doubtless now join a queue of executives waiting at Trump Tower to curry favour and to assess the new man’s priorities before he assumes office. Those supplicants will soon discover that Mr Trump’s attitude towards business has three contradictory strands. He is passionate about unleashing the might of the private sector in order to revive growth. There is certainly plenty of scope: last year listed American companies invested a mediocre 46% of their total cashflow. Yet he is also a populist who thinks the economy is rigged in favour of big business and crony capitalists, and he is a protectionist. In the coming months these three different strands will respectively excite, worry and scare the business world.
Start, first, with the things firms will like. Mr Trump’s tax plans have been ridiculed by economists but their broad thrust will be wildly popular with companies. He has said he wants to slash the headline corporate-tax rate from about 40% to 15%, at the same time as removing a myriad of exemptions that allow businesses to dodge their bills. Mr Trump also wants to make it possible for companies to bring home the $2trn or so of accumulated profits they have stashed abroad, without triggering a huge tax bill in America. An amnesty, or a big reduction of the rate paid, will prompt companies to repatriate a wall of cash, although whether they will invest it or spend it on buying back shares remains to be seen.
Mr Trump’s proposed war on red tape will also be popular. He was cheered by an audience of business bigwigs in New York when he spoke on the theme in September. By repealing Barack Obama’s Affordable Care Act, he may help small firms who complain they are swamped by bureaucratic requirements. And if he succeeds in kneecapping the country’s environmental regulators, that should mean more lenient treatment of carbon-intensive industries including oil, gas and coal. On November 9th the share price of Peabody Energy, a coal firm that is trying to emerge from Chapter 11 bankruptcy, surged by almost 50%. Mr Trump’s energy secretary could well be Harold Hamm, a pioneer of the hydraulic-fracking industry in North Dakota and elsewhere. An infrastructure-spending boom will go down well with business, too. All firms complain about America’s crumbling roads and late-Brezhnev-era airports. And the construction industry could earn windfall profits—one reason why an index of shares of companies in the sector rose by 9% the day after the election.
Tax, lies and red tape
If tax cuts, deregulation and new infrastructure are things that firms of all sizes will cheer about, big companies will worry about the second factor: Mr Trump’s populist suggestion that the economy is rigged against consumers and ordinary workers. Had she won, Hillary Clinton would have been widely expected to reinforce America’s antitrust apparatus in response to mounting evidence that competition has waned across the economy and incumbent firms have got too powerful. Mr Trump’s signals on this have been mixed. In October he objected to AT&T’s $109bn bid for Time Warner, a media firm, which he says will lead to a concentration of corporate power. But he has taken a softer line on the pharmaceutical industry’s high prices for drugs, and share prices in the sector rose on news of his victory, having been pummelled by expectations that Mrs Clinton would rein in pricing.
Policies that boost competition and attack cronyism make sense, but the risk is that under Mr Trump they spiral into a nastier, populist confrontation with big business. That is a particular vulnerability for the two great power centres of the American economy, Wall Street and Silicon Valley. Mr Trump wants to repeal the Dodd-Frank Act, a clumsy law passed after the global financial crisis of 2008, aimed at re-regulating banks. Bankers despise it. But he has also proposed separating investment banking from commercial and retail banking, which would be a nightmare for universal banks such as JPMorgan Chase, which have spent miserable years adapting to today’s rules. Silicon Valley is also a potential flashpoint. Big platform companies such as Facebook and Google are powerful, verging on arrogant, and they have been openly hostile to Mr Trump. So far he has taken aim at what he called the “monopolistic tendencies” of Amazon, an e-commerce company. It is also easy to imagine him objecting to Uber’s treatment of its drivers, or forcing Apple to unlock customers’ iPhones on grounds of national security. Then the technology industry’s disruptive, liberal vision of America would be primed to clash with Mr Trump’s more nativist one.
However, it is the third strand of Mr Trump’s ideas on business, his protectionism, that is most clearly bad for business. Since Mr Trump struck his very first big deal in Manhattan back in the mid-1970s, building the Hyatt Hotel at Grand Central Terminal, corporate America has ventured ever farther afield: 44% of the sales of the S&P 500 index of big companies are now earned abroad (see chart). Global firms will come under pressure to locate more production at home. During the campaign Mr Trump lambasted Ford and Mondelez, a food firm, for employing too few people in America. Trade wars and rising tariffs could severely disrupt supply chains: the American car industry relies heavily on component suppliers in Mexico. And if America imposes tariffs on Chinese imports, as Mr Trump has said it will under his leadership, an obvious and logical response from China could be to clamp down on the activities of American multinationals in a country where they reap sales of $300bn a year.
Plenty of American chief executives will tell themselves that Mr Trump, whatever his other manifest flaws, understands business. That is true: he has a far more instinctive feel for companies and capitalism than does Mr Obama, or Mrs Clinton. But partly as a result, he is also an interventionist. He believes that American business can be an instrument of his power, to be bought, bullied and remoulded in order to achieve a national revival. His first career, as a self-styled tycoon, made little mark on corporate America. In his second, as a politician, his impact could be profound.