The business community’s reaction to Donald Trump’s victory in the presidential election is likely to be mixed, and his policies could have both positive and negative impacts on business growth, some experts say.
But major business organizations in Wisconsin are expressing optimism about the Trump presidency.
The Metropolitan Milwaukee Association of Commerce has a positive outlook on the new policies Trump has proposed.
“New administrations are always a time for optimism and you have to go into them optimistic,” said Steve Baas, senior vice president of governmental affairs at the MMAC. “And entrepreneurs and business owners are optimistic by nature or they wouldn’t be in business.”
Some of the major regulatory changes that occurred under the Obama administration have impacted Wisconsin businesses, Baas said. The state is currently in federal court challenging the Clean Power Plan because of the costs it would impose on utilities and, in turn, businesses.
“There’s some strong optimism that some of the regulatory things that have complicated the lives of businesses may be revisited,” Baas said. “Things like the Clean Power Plan, NLRB, Obamacare.”
So far, MMAC members are still absorbing the news of Trump’s election, he said. Anecdotally, Baas has heard curiosity, surprise and optimism about a non-politician taking the country’s top political office.
“Trump is a businessman, and he’s been a successful businessman,” Baas said. “Business is a function of addition, not division. If Trump can find solutions by building coalitions of the willing, rather than dividing groups into opposing polarized groups, I think that will be received well not only by the business community, but by the population in general.”
Halting the expansion of government regulations, reforming the corporate tax rate and embracing energy reserves should all benefit Milwaukee and Wisconsin businesses by breaking through the stagnating GDP levels of the past few years, said Kurt Bauer, president and chief executive officer of Wisconsin Manufacturers & Commerce.
“I think that you need common sense on so many of these regulations that we just haven’t seen in the last eight years,” Bauer said. “It’s very difficult under the current rules to get an expansion of your air permit. If you’re a manufacturer in southeast Wisconsin who can’t get an expansion of your air permit, then you’re not going to grow there.”
Baas said the MMAC is watching closely what Trump does on trade, immigration and the Affordable Care Act.
“On trade, he says he’s not against trade deals, he’s against bad trade deals,” he said. “The devil is in the details there. We’re going to want open markets but we’re also going to want fair deals. As Obamacare has been implemented, we’ve heard from a lot of businesses about higher costs. Repeal and replace is a nice soundbite. The actual policy is a lot more complicated than that.”
“I think it’s reasonable to say that we’re on the verge of a trade war,” said Mordecai Lee, professor of urban planning at the University of Wisconsin-Milwaukee and a former Democratic member of the Wisconsin Assembly and Senate. “Not only is (the Trans-Pacific Partnership) not going to get enacted, but that he’s going to try to terminate other agreements. Presumably what he wants is just a lot of bilateral trade agreements.”
Lee said he suspects a mixed reaction from the business community to Trump’s election.
“Some are delighted and will benefit from Trump’s politics and equal subsectors will not. I’m guessing that right now, there’s very mixed, some people are celebrating and some people are depressed, and I’m just talking about people in business,” Lee said. “There’s no doubt that he has business acumen and business success. It just does not reflect the way every American businessperson today thinks about what’s good for their business and bad for their business.”
Trump’s win surprised the stock market, which was anticipating a Clinton victory and the certainty that entailed. As Tuesday turned to Wednesday, futures for the Dow Jones Industrial Average had fallen more than 800 points. But the market rebounded this morning rising 182 points, and is still up nearly 6 percent for the year.
“The market likes certainty. With Clinton, they knew what to expect. With Trump, they basically don’t know what to expect. And that’s what leads to volatility,” said Abdur Chowdhury, professor of economics at Marquette University.
In the short-term, investors will seek safety, he said.
“I expect the U.S. dollar, the Mexican peso and currencies in trading economies like Australia, like South Korea, these currencies will drop in value,” Chowdury said. “On the other hand, safe havens like gold, the Swiss franc, the Japanese yen, those three I expect to go up.”
He encouraged investors to wait out the volatility, which should stabilize after a few days.
“I would say ride it out, because what I’m expecting is given this volatility, I expect that someone from the Trump team will come out with a statement, maybe today and maybe tomorrow, suggesting calm in the financial market because we do see volatility in the global market,” Chowdhury said.
In the medium term, Chowdhury expects health, construction and defense stocks to increase in price, since Trump has proposed repealing Obamacare, upgrading infrastructure and increasing defense spending. At the same time, consumer-related stocks are likely to fall as Trump’s protectionist trade policy is put into place and inflation creeps up.
As for the labor force, deporting illegal immigrants, as Trump has proposed, is expected to reduce available workers in an already low unemployment rate environment.
“Now there are 11 million undocumented immigrants,” Chowdhury said. “If a large portion of that group is sent back, you will see a drop in the labor force. That will, in my opinion, negatively affect economic activity and GDP.”
And Trump has promised to lower the corporate tax rate from 35 percent to 15 percent. Companies can expect better profits as a result, unless they have multinational exposure, he said.
“Trump has talked about how he will lower the taxes on companies that want to repatriate their money from abroad,” Chowdhury said. “A lot of multinational companies in the U.S. have a significant amount of cash overseas. If he does that, then you can expect to see a return of some of that money to the U.S.”
The MMAC supports a lower corporate tax rate and expects it will make U.S. businesses more competitive.
“If you have a tax code that penalizes you for doing business overseas and making profits overseas relative to companies who are located outside the country, it hurts your competitiveness,” Baas said. “We need to realize every day that we’re in a global competition and we need a tax code that’s a competitive advantage.
Reduced government regulation is also on Trump’s to-do list, and is likely to impact businesses.
“Given what Trump has said in his campaigning, he wants to have less regulation, so that will obviously have an impact on the banking industry in general, on a large number of firms,” Chowdhury said.
Trump’s campaign platform proposes creating 25 million new U.S. jobs over the next decade. At least in Wisconsin, the main challenge is not creating jobs, but filling existing jobs, Bauer said.
“I think it’s hard to fill that many jobs without probably bringing in people from outside the country,” he said.
Wisconsin’s agricultural community voiced the need for a smart immigration policy to address those workforce needs when Trump visited Wisconsin, Bauer said. And the state’s farmers and manufacturers are targeting growing Asian markets for exports.
“Trade is going to be important and if he follows through on what he had said, that he’s not anti-trade, he just wants fair trade deals, then I think my members will be fine,” Bauer said.
But Bauer said he would like Trump to be more specific on some of his policy proposals during the transition period.
“I think that there’s a general optimism and we’ll have to see now during the transition period if President-elect Trump gets more specific about the things he outlined on the campaign trail,” he said.
Some of Trump’s policies don’t match what Congressional Republicans have traditionally supported, so the party’s different factions will need to find common ground, Lee said. He called Trump’s election a political revolution.
“If the traditional Republican platform was for free trade and the benefits of immigration, that is not what Donald Trump stands for,” Lee said. “He is not a chamber of commerce Republican and he’s not even a Tea Party or evangelical Republican. He’s a new kind of Republican.”
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