Today, America will swear in its 45th President, one Donald J. Trump. What will his Presidency mean for British businesses? While the challenges are obvious, there are also opportunities.
UK-US Trade Deal
Trump has taken an upbeat, if cavalier position on Brexit and the US-UK trade relationship. Whereas President Obama promised the UK would go to the “back of the queue”, a pledge suspicious in and of itself given his use of British vocabulary, Trump took a different tone this Monday just before May’s big Brexit speech.
One of Trump’s senior aides said the US would be able to come to an agreement within 6 to 12 months. With the pound surging to 2.65% on Monday following Theresa May’s Brexit speech, representing the best single-day performance of pound against the dollar since 2008, Brexit and Trump combined may be something of a silver lining for Anglo-American business.
That said, quick solutions seem unlikely. Under the Government’s current timetable, the UK would not be able to sign any deal until 2019 at the earliest, and that is assuming that the complexities of negotiations don’t prolong the talks, as is often the case with global trade deals. And although Foreign Secretary Boris Johnson received a warm welcome on his recent trip, what may be most telling is the order in which Trump phones, or even meets with, overseas Heads of State. Prime Minister May will be hoping she gets an early slot. On the possibility of an Anglo-American trade deal, Trump’s actions will speak louder than his so-far ‘shouty’ rhetoric.
Since Trump arrived on the political scene, we’ve seen a level of scrutiny into industrial policy like never before. Getting involved in the nitty gritty of procurement has not typically been the purview of the Executive. As Trump is no typical President, this area may be happy hunting ground for him.
In December President-Elect Trump tweeted about the F-35. This wiped $4bn off of Lockheed Martin’s share price. That’s roughly $28.6 million per character.
Boeing has responded to veiled threats by agreeing to lower the price of Air Force One. Automotive giant Ford scrapped plans for a $1.6bn plant in Mexico, in favour of investing further in Michigan. Businesses will have to be much more adept in dealing with the volatility of a twitter President; potentially signifying a new way of politicking industrial relations.
Opportunity for UK companies
What is less clear is the impact on European and UK companies. The savings pressures on major US programmes has had a negative trickle-down effect on UK companies. Just this week in Davos the Chairman of BAE Systems, a major partner in the JSF programme, talked about a “double digit” cost saving pressure on the UK firm following Trump’s intervention.
Jack Ma, CEO of $22 billion business Alibaba, has promised the creation of 1 million jobs over the next 5 years by helping US small businesses sell products and services to Asia. There will still be opportunities for foreign business in the US, but securing American jobs will likely have to be a the heart of any ventures.
There are also likely to be numerous infrastructure projects under the Trump administration, not least ‘the wall’. Trump has spoken of an infrastructure investment package of between $800 billion and one trillion dollars, potentially opening up many opportunities. Whether this figure will actually be supported by fiscally Conservative members of the House, is a more complicated matter.
For all his rhetoric over the value of competition, Trump himself, and many members of his Cabinet, have gotten rich in heavily protectionist sectors in the US. How open they will be to overseas competitors remains to be seen, though what is clear is that any compelling offer will have to include a significant US work share and labour presence.