Business leaders’ myopic reversal on Donald Trump

When a mob of Donald Trump’s supporters attacked the US Capitol on January 6 2021, many business leaders who had backed the outgoing president finally threw in the proverbial towel. Blackstone’s Stephen Schwarzman called the assault “appalling”, and investor Nelson Peltz said he was “sorry” for voting for the incumbent. The remorse of wealthy donors appeared to be evidence of the end of Trump.

But “Teflon Don” has bounced back. So, too, has the support of America’s tycoons. Peltz and Schwarzman say they will support him again. Magnates who funded Trump’s primary competitors, such as Bill Ackman, appear to have fallen behind him. Even traditionally liberal Silicon Valley moguls are offering their support. Though their rationales vary, many say, in essence, that Trump will be “good for business”. 

That stance, however, ignores the major business risks posed by a second term. Trump and his advisers have unleashed a litany of vague policy pronouncements, many of which — if taken seriously — threaten to undermine basic functions of the US economy.

The former president has maligned Jay Powell and said he will replace him as chair of the Federal Reserve, in a move that could endanger its independence. He has also pledged to take on the “deep state” by bringing independent agencies under the control of the White House, increasing the prospect of regulatory failures. Robert Lighthizer, his potential pick for Treasury secretary, is said to tout dollar devaluation, which could destabilise the financial system.

Trump’s trade policies could also be disastrous. He has proposed 10 per cent tariffs on all imports and 60 per cent levies on Chinese goods. Such broad-based tariffs could reignite inflation and draw the US closer to open conflict with China. Universal levies may also harm businesses if they are not met with domestic investment — a likely scenario should Trump win, as he has railed against President Joe Biden’s Inflation Reduction Act.

The US economy’s success compared with other developed countries during Biden’s presidency seems of little consequence to business leaders supporting Trump. They fear Biden’s tax plans, are perturbed by his administration’s interventionist and antitrust policies, and question his mental acuity.

To be sure, the US economy fared better under Trump than his detractors predicted. Growth was strong, and effective Covid-era stimulus raised confidence in his stewardship. But the economy has changed since he left office, making many of his proposals arguably not fit for purpose.

America’s debt has become even more supersized. Trump’s planned tax cuts will add to the burden, and analysts worry they will not provide offsetting stimulus in a higher interest rate environment. His vague aspiration to deport millions of undocumented workers would arrest the economy’s momentum, as migrants are fuelling its surge.

Indeed, many of Trump’s proposals are hazy. His policies lack detail, and, as in his first term, he may abandon plans. Some may see Trump’s past wavering as evidence that the radical parts of his agenda are simply rhetorical. They should be wary. Trump’s second term may lack the “adults in the room” who restrained his more incendiary impulses. And a second Trump term seems set to be driven by “revenge” — against his enemies, and against the democratic system.

Corporate leaders should think critically about what is in the best long-term interests of their businesses. Tax and regulatory gains may seem appealing. But uncertainty, economic radicalism and degradation of the rule of law risk undermining the conditions that enabled them to prosper in the first place.

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Letters in response to this article:

Will business bosses regret Faustian pact with Trump? / From Steven E Cerier, Forest Hills, NY, US

America’s C-suite bosses are deluding themselves / From Alan Sutton, Laguna Niguel, CA, US

CEOs won’t give up addiction to short-term stock price gains / From Toby Bernstein, Skokie, IL, US