President Trump understands business, right? Right?
Well, maybe not. He certainly earned corporate cred with his big reduction in business taxes, and his ongoing efforts to cut regulation. But Trump now seems perplexed about normal decisions businesses make as they navigate changing conditions and bad decisions made by politicians. Meanwhile, the number of marquee business names on Trump’s enemies list continues to grow.
Trump is now attacking Harley-Davidson (HOG) for its plan to move some motorcycle production outside the United States. But Harley is doing that because of Trump’s own policy. When Trump imposed tariffs on European steel and aluminum imports, Europe responded by slapping tariffs on a like amount of imports from the United States, including Harley’s bikes. Every mainstream economist predicted such retaliation would happen. The European tariffs will raise the cost on a Harley in Europe by around $2,200, the company says—but only if the product comes from America. So Harley wants to avoid the tariff by making Europe-bound bikes someplace else.
This is what CEOs get paid to do: Make big, strategic decisions they think will optimize profitability, which is their obligation to shareholders. Any company that doesn’t maximize profitability is going to have a hard time getting anybody to buy its stock. And when the stock falls far and long enough, the CEO usually gets fired.
Trump is taking Harley’s tariff-evasion maneuver personally. “I’ve done so much for you, and then this,” he tweeted, like a jilted lover. “Harley-Davidson should stay 100% in America, with the people that got you your success.”
Last year, Trump was pro-business, with his tax cut giving companies a compelling reason to stay in America. But this year, he’s anti-business, with his tariffs raising costs and sowing confusion about what will come next.
Part of Trump’s calculation, if you can call it that, is that the tariffs he’s imposed on $107 billion worth of imports (so far) are a cudgel he will eventually wield to extract better, not worse, trading terms for American companies. But for now, we’re in the “worse” phase of Trump’s scheme, and business leaders have to make decisions today, based on conditions today. Everybody who follows financial markets knows companies get evaluated based on quarterly performance—and when the numbers are weak, shareholders sell. Doesn’t Trump know this?
If there’s an end game to Trump’s trade strategy, he hasn’t said what it is. All he has offered are slogans like “fair and reciprocal trade,” while aiming for the meaningless goal of reducing the number that represents our trade deficit with China and some other countries. To what end? More jobs? Well that’s odd, because there are already more open jobs in the United States than there are unemployed people to fill them. What companies need are more qualified American workers. What Trump is giving them are more reasons to hire foreign workers.
Overall, the tariffs Trump has imposed so far will kill more than 500,000 US jobs, according to consulting firm Trade Partnership Worldwide. That’s because tariffs will raise costs for American producers, who will no longer find it cost-effective to produce some things in the United States at a higher cost. Trump is considering another set of tariffs for imported autos that would axe another 157,000 jobs and add an average of $6,400 to the cost of some 8 million imported automobiles Americans buy each year. How is this the thinking of a businessman?
Trump’s trade chaos is starting to show up in economic data. The stock market has flatlined this year, even as corporate profits have risen sharply. And firms more exposed to trade risks have fared worse than those protected from Trump’s trade policy, a sign investors think Trump’s protectionism will hurt profits. Durable goods orders also fell in May, a surprise decline that might reveal firms are newly worried about spending.
Corporate lobbying groups such as the Business Roundtable, the US Chamber of Commerce and the Koch brothers’ network are complaining louder and louder about Trump’s trade policy as his tariffs intensify. Harley-Davidson, meanwhile, now joins Amazon, Time Warner, the NFL, the postal service and perhaps a dozen media companies on Trump’s enemies list. You’d think a president who campaigned on his business experience would get along better with business.
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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman