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Important news about money and politics in the race for the White House
When a mob of Donald Trump’s supporters stormed the U.S. Capitol on January 6, 2021, many business leaders who had supported the outgoing president finally caved in. Blackstone’s Stephen Schwarzman called the attack “horrible,” and investor Nelson Peltz said he “regrets” voting for the sitting president. The regrets of wealthy donors seem to be evidence of Trump’s demise.
But the Teflon Don is back. And the support of America’s tycoons has returned. Peltz and Schwarzman have said they will support Trump again. Tycoons who funded Trump’s main rivals, such as Bill Ackman, appear to have fallen behind. Even traditionally liberal Silicon Valley tycoons have voiced their support. Their theories vary, but essentially, many say Trump is “good for business.”
But this stance ignores the huge business risks that a second term poses: Trump and his advisers have made a string of vague policy announcements, many of which, if taken seriously, threaten to undermine the basic functioning of the U.S. economy.
Former President Trump has denigrated Jay Powell and spoken of removing him from the position of Federal Reserve Chairman, which could jeopardize the independence of the Federal Reserve. He has also promised to fight the “deep state” by placing independent agencies under White House control, raising the possibility of regulatory failure. Robert Lighthizer, who may be nominated by former President Trump for Treasury Secretary, is said to be advocating a devaluation of the dollar, which could destabilize the financial system.
Trump’s trade policies could also be disastrous. He has proposed a 10% tariff on all imports and a 60% tax on Chinese goods. Such broad tariffs could reignite inflation and bring the US closer to an all-out confrontation with China. Universal tariffs could also hurt businesses if not accompanied by domestic investment, a likely scenario if Trump wins, as he is vehemently opposed to President Joe Biden’s Anti-Inflation Act.
How well the U.S. economy has performed under Biden compared with other developed countries seems of little importance to business leaders who support Trump, who fear his tax proposals, are uneasy about his administration’s interventionist and antitrust policies and question his intellectual competence.
To be sure, the US economy has performed better under Trump than critics expected: economic growth has been strong and his effective COVID-era stimulus package has bolstered confidence in his governance. But the economy has changed since Trump left office, and many of his proposals are arguably no longer fit for purpose.
The U.S. debt has ballooned. Trump’s proposed tax cuts would add to the burden, but analysts worry they may not provide an offsetting effect in an environment of rising interest rates. With immigration fueling a burgeoning economy, Trump’s vague proposal to deport millions of undocumented workers would cripple economic momentum.
Indeed, many of Trump’s proposals are vague. His policies lack detail, and he may abandon his plans as he did in his first term. Some may see Trump’s past wavering as evidence that the radical parts of his policies are merely rhetoric. They should be wary. Trump’s second term may not have the “adult in the room” who has reined in his more inflammatory impulses. And Trump’s second term seems driven by “revenge” against his enemies and against the democratic system.
Corporate leaders need to think critically about what is best for their companies’ long-term interests. Tax and regulatory benefits may seem attractive, but uncertainty, economic radicalism and the erosion of the rule of law threaten to undermine the conditions that enabled businesses to thrive in the first place.
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