It will be a year of breaking paradigms. It’s about time.
Those who know me well know that I’m never afraid to wade into politically charged situations. I write this column in that spirit. There is much debate on what is being called the Trump Effect. Those who voted for him give him credit for recent reshoring announcements and stock market gains. Those who didn’t predict trade wars, accuse him of picking winners and losers, and complain he is taking credit for reshoring efforts that would have happened anyway. No one thinks he has great interpersonal skills. So where is the truth?
Anecdotally, I’m hearing very positive comments from many of the regional EMS CEOs I know. Universally, they seem to feel regulations and government-driven cost mandates are driving them out of business. Most feel if current policies continued, they would be the straw that broke the camel’s back.
What could a Trump effect look like in 2017? I think there are several positives:
• A president who is pro-manufacturing. We haven’t had a champion of manufacturing in the White House in a long time … decades, in fact. Having a president who understands we need transformative manufacturing jobs to stay globally competitive is a huge win for manufacturing companies. More important, having that message frequently repeated will help counter the myth that US manufacturing is no longer a viable career path.
• A president who understands the impact of taxation and regulation on business growth. Taxation and regulation is strangling mid-size businesses and incentivizing businesses that move offshore to do so. Reversing that will incentivize more US investment. China originally gave five-year tax holidays to attract the electronics industry. It worked pretty well.
• A president favoring revisions to the Affordable Care Act. ACA is a huge cost to both companies and individuals that are not receiving subsidies. Increased competitiveness in insurance options and more cost transparency would be welcomed by most businesses.
• A president who isn’t afraid of nationalism. I have yet to visit a country other than the US that sees nationalism as a dirty word. Most developed nations find ways to put the interests of their citizens before the interests of the global community. They recognize employed workers earning a market-driven living wage costs taxpayers less money. Having a president cheerlead a Buy USA movement will benefit US manufacturing.
But what about the scary side?
• The impending trade war. If President Trump enacted all the promises he made on the campaign trail, we might have a trade war. However, I think his behavior suggests he is simply setting a hard tone to improve negotiations and put the US in more favorable positions. Many of our trade deals are bad, and we routinely ignore unfair trade practices. Long term, having a fair trade focus will benefit US companies. Short term, companies with operations in parts of the world that benefit from our weak trade deals may see retaliatory practices in those countries.
• The border wall and NAFTA. US and Mexico business is intertwined significantly. Finding the right way to balance our immigration regulation with Mexico’s desire to further its national interests will be challenging. As I write this, the Mexican peso has devalued to 21 pesos to the dollar. I can’t help but believe some of that is due to a desire to make Mexican manufacturing costs look even more attractive. A strong manufacturing base in Mexico may help bring back the supply-chain advantage lost when large-scale manufacturing migrated to China, which is a positive. However, that level of devaluation can create instability and ultimately impacts the ability of Mexican nationals to buy US goods and services. It also creates issues for companies whose expenses are paid in both pesos and dollars. Tighter immigration enforcement combined with reforms that make it easier for economic immigrants who don’t want citizenship to work here will help US businesses that play by our immigration rules and cut down on worker exploitation on this side of the border. Achieving the right balance in trade, immigration and security won’t be easy, but is critical to both countries’ interests.
• Shaming government contractors. As a taxpayer I like the idea of someone asking hard questions about cost overruns. As a business owner I realize the pitfalls, particularly when being called on President Trump’s carpet drops stock prices. Hopefully this is also an area where better balance is found on both sides. From the EMS perspective, expect more pressure to cut costs.
• China and Russia. We can’t live peacefully in a world where we don’t have shared strategic interests with these two countries. However, we also can’t live peacefully in a world where either of these countries holds all the cards. It will be interesting to see how President Trump addresses this, since China still holds a lot of good cards and Putin bluffs well.
The one easy prediction is 2017 will be a year of breaking paradigms. And a lot of paradigms need to be broken. If the service economy worked, there would be no Fight for 15 movement, and half the country wouldn’t be on some form of government assistance. If unchecked globalism worked, the UK would still be in the EU and we’d have more US manufacturing. The reality is we need to take a hard look at policies that aren’t sustainable, and President-elect Trump does not seem afraid to do that.