5 REASONS TO EMBRACE THE TRUMP PRESIDENCY - Global Trade Magazine
  November 9th, 2016 | Written by

5 REASONS TO EMBRACE THE TRUMP PRESIDENCY

As America wraps its head around having elected its first president with neither government nor military experience, we must decide whether to stay entrenched in the negative prognosticating that has permeated the long and brutal election cycle, or to look ahead to the positives that a Trump presidency could bring to the country and, for the purposes of Global Trade, to the international business community.

 

HE’S A BUILDER. HE’S GOING TO BUILD.

“We’re going to rebuild our infrastructure, which will become second to none—and we’ll put millions of people to work as we rebuild it,” Trump declared in an acceptance speech that took many by surprise for its humble, conciliatory and inclusionary tone. But his promise to build shouldn’t surprise; people tend to do what they know.

Many want to knock Trump for his ego, but I say let it be a guiding light. It’s something you can trust—he wants to be remembered, and positively. He brands everything he owns with “TRUMP;” now he’s taking ownership of the Office of the Presidency. I suspect he’ll want to make his mark by updating our sagging infrastructure, picking up where Obama left off in updating our nation’s ports, while accelerating and expanding the scope as much as possible within his power. For the nation’s international traders and logistics community, this should be a welcome goal.

 

LOWER CORPORATE TAXES

As I’ve written before in Global Trade and discussed with many in the community, it seems that the cost disparity between producing in China rather than the United States is about 20 percent in China’s favor. Over the past several years we’ve witnessed the “reshoring” trend, in which U.S. companies have exchanged that 20 percent to gain a few major advantages of domestic manufacturing: faster access to the American market, American labor, and a “Made in America” label on their products.

Trump says he wants to lower the United States’ corporate income tax from 35 percent to just 15 percent—a 20 percent reduction. With the Republican party keeping control of both the House and Senate—and professing to have the same tax-reduction goal—this is the best chance to make a more competitive corporate tax a reality.

Needless to say, wiping out the 20 percent cost differential between producing in the U.S. and China through tax reduction should be the tipping point to see not only a return of U.S. manufacturers, but additional foreign investment and the repatriation of wealth from other major companies. And we’ll need it if we’re going to rebuild infrastructure without blowing out the national debt even further.

 

ACCELERATED ECONOMIC DEVELOPMENT

Economic developers: Buckle up! If Trump can actually work with the Republican Congress for the mutual goal of reducing the corporate tax significantly, you can expect the next Gold Rush to jump into your lap. Once companies can avoid 30-plus days of ocean transit, visit their factories without a long and expensive international flight and bask in the good press of employing Americans again, they’re going to come back “big league,” to borrow a phrase from Trump.

It’s going to be fiercely competitive, but if these tumblers can fall into place I fully expect there will be plenty of businesses to work with.

 

GREAT OUTLOOK FOR LOGISTICS COMPANIES

The benefits of returning manufacturing to America will spread far and wide. Our trade imbalance has helped create some real issues, starting with the ocean carriers. There’s a massive flow of goods coming to the U.S. from Asia, yet when the ocean carriers return, they’re going back with far, far less cargo and losing money in the process. Every container-worth of goods that moves its production to the United States is a major win for an industry whose rates have been squeezed dramatically—especially if it’s exported.

Likewise, expect the ports to be less bottlenecked and for goods to flow into the country faster and more efficiently. More goods in the U.S. will require the use of more warehousing space and therefore more sales of industrial warehousing for economic developers to look forward to. The truck driver shortage may pose a challenge, but then again, driverless trucks are advancing faster than expected. Well, faster than I expected, anyway.

Logistics services have a long sales cycle. I believe that the 3PLs and freight forwarders who actively support the incoming administration’s stated goals and who start to set their companies up to win this business will be very well situated in the coming years.

 

IMPROVED—NOT ABANDONED—TRADE DEALS

As this magazine has often advocated, we want “Peace through global trade.” But to have the latter, you must have the former. In case you missed it, the United States has been on a collision course with Russia, and separately with China. The more hysterical coverage has warned of World War III, and while that has seemed unlikely, I see no wisdom in the saber rattling between two massive nuclear powers in the U.S. and Russia. Conciliation is paramount, and diplomacy is the answer. Within hours of Trump’s victory, Russian President Vladimir Putin, and Philippine President Rodrigo Duterte—who a week earlier had stood before China and denounced America—both offered Trump congratulatory statements and willingness to resolve their disputes. That, in my opinion, is the most immediate positive development of Trump’s victory.

With a better prospect of peace—Putin is no fan of Clinton—we can focus on trade. Trump has talked tough, particularly as it relates to NAFTA and the Trans-Pacific Partnership (TPP). Each deal has many positives for America’s global traders, but few (if any), I imagine, would deem either the perfect embodiment of free trade. What you heard from Trump is a launching point for negotiation, since no sensible negotiator starts bargaining from the middle. One thing I’ll say for Trump is this: He seems to understand what many others haven’t, which is that the American marketplace is the ultimate bargaining chip. If he can use that chip to keep free access to foreign markets for our exporters while shoring up some of the less desirable, murkier aspects of the TPP, it will have been worth its delay to strengthen it for the home team.

 

Of course no one knows the future, but I can certainly guess at it. If Trump is successful in repairing the stigma he created of himself while barnstorming the Republican party en route to the presidency, if he can unify his party behind a pro-American agenda to reduce corporate taxes and fortify our infrastructure, I expect a lot of pieces to fall in place for a strong manufacturing resurgence that will send reverberations through many peripheral industries.

 


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