There is now no doubt. Donald Trump won the US presidential election decisively and seems to be headed to have full Republican control of Congress. Add to that the rightward bent of the Supreme Court, and we are in for four years of a Trumpian America and, maybe, a Trumpian-driven world. Things will change.
Some are celebrating. Others will be deep in gloom.
Here I would like to focus on one aspect of what the next four years might mean – the potential impact on how business is conducted and how businesses might react to this Trumpian world.
First of all, it’s probably reasonable to say that we don’t really know what, exactly, a Trump administration will do, when, and how. Unpredictability has always been one of Trump’s characteristics. Everyone is making wild assumptions – whether it’s the buyers of Bitcoin who have sent prices surging or the environmental activists who are tearing their hair out in despair. Uncertainty is high. There will inevitably be a battle of views within the administration and outcomes are unpredictable.
However, while uncertainty of the specifics is real, we can guess the likely general direction of travel.
Trade
There seems little doubt that barriers to trade will rise. This is not just a Trump driven event. The anti-globalisation backlash has already gathered pace in many places. Biden was part of it. The EU is part of it. Businesses will need to continue to adapt to tightening options on their supply chains, export controls on sensitive products and services, and increasing pressures for re-shoring.
We will also likely see the continued erosion of any idea of multilateralism. Be it the seemingly never-ending discussions on a global corporate tax agreement, climate commitments, and the rest. Companies should prepare for a world of no agreements, or some selective bilateral agreements, or at best, the odd plurilateral agreement.
In short, those businesses that have, to date, not taken seriously the erosion of the multinational model and those that still depend on China for their supplies or as an export market will need to proceed with caution. Those companies, apparently there are several, that have to date largely ignored export restrictions on sensitive products should think about getting their house in order. Investors might want to look at whether they want to hold stocks in US companies whose near-term growth is significantly China dependent.
The war on woke
The war on woke is, maybe, the one element that unites most members of the new administration and the new Congress. We can all engage in tedious and largely pointless discussions about what constitutes ‘woke.’ But that’s neither here nor there. It’s just as much, if not more, about direction of travel as it is about specifics.
There seems little doubt that the environmental agenda will take a hit. There will be no signing up to climate targets. I suspect that talk about biodiversity and natural capital will not even register in the new administration. Oil and gas production will rise, potentially lowering global prices that are unlikely to be undone by carbon taxes. There will be no regulations from the SEC or anyone else around environmental or other “ESG” considerations.
How will business respond? The obvious answer is that different businesses will respond differently depending on their own circumstances and the established views and prejudices of management.
Of course, government positions and regulation are a powerful driver of behaviour. But they are not the only ones. Businesses also have to respond to pressures from other stakeholders – and such pressures may increase in an attempt (successful or not) to mitigate regulatory laxity. Companies operating in multiple jurisdictions will, in any case, have to contend with regulations such as CBAM and others that will also impact their business choices.
Maybe more important will be the fact that companies must look at what their competitive positions will be when the Trump era is over. If we believe that the green transition is now embedded, that the only questions are about pace and detail, then American companies will not want to emerge from four years of Trump finding themselves well behind their international competitors in being well-positioned for a changing economy. A salutary lesson should come from the mess that Western automobile companies have made with their foot dragging on the EV transition. It has left them so far behind Chinese competition that it threatens their future viability.
One silver lining is that we might finally see the disappearance of the performative aspects of the green transition. There will be less incentive for shouting from the rooftops about marginal and largely insignificant ‘green’ actions; less greenwashing; more focus on action that has meaningful long-term gains in a world rightly concerned about our depleted natural capital.
My guess is that the biggest impact will be in the significant dialling down of efforts in areas such as DEI – a process that had already started well before this election and the practicalities of which have been challenging.
Pleasing the boss
Let us also be clear. Some business leaders will be driven by venal instincts more than by principle. They will want to curry favour with the new administration and its favourites, especially those businesses that are dependent on public contracts. There are reports that companies that eschewed advertising on X since the Elon Musk takeover are now thinking of resuming their advertising on the platform to appease Donald Trump’s new best friend.
Overall, it is possible that life for business leaders will become somewhat more challenging rather than less. If a great deregulation materialises, some will find it easier to do business and boost their short-term profits. That will need to be balanced against long-term competitiveness as the world continues to change and they still must meet the requirements of other jurisdictions in which they operate. Both their actions and their public pronouncements will need to be ever more skilled as they navigate the narrow path between fealty to Trumpism and the countervailing pressures from other stakeholders.
It may well be a bumpy ride.
This post first appeared on Joe’s Random Thoughts newsletter on LinkedIn.
