November 11, 2015
Gary Meyers, CEO of FusionOps
Wednesday, 11 Nov 2015 | 10:52 AM ET
To political junkies and a-politicals alike, the entertainment value of the presidential debates has been indisputable, ranking, as they did, higher than TV reality shows. Love him or hate him, much of that amusement was thanks to Donald Trump. Whether his ideology and “call-it-like-he-sees-it” style is something you believe is necessary to finally fix our political system, or whether his narcissistic rants makes you question the direction of our country, there is no denying that he is shaking things up.
As a businessman focused on technology and supply chains, I find it intriguing to consider how his rhetoric would translate into manufacturing policy were he elected. One thing is for certain: “President Donald Trump” would have a profound — and likely, profoundly disruptive — impact on worldwide supply chains.
One can argue “The Art of the Deal” (the name of Trump’s 1987 book) is an important skill for any foreign and trade policy maker. With his years of experience and well-established network of global business leaders, it’s conceivable that Mr. Trump’s negotiating prowess would yield improved trade agreements. As a real-estate developer, he is familiar with government negotiation and contracts. One imagines that he would nominate shrewd dealmakers to his cabinet, bringing more global business experience to bear than in any previous administration.
If successful, “President Trump” would remove roadblocks for businesses in terms of sourcing, manufacturing, and selling products overseas. Perhaps new trade partners would be identified. Convincing his high-powered friends to forfeit the luxury of the private sector to join his crusade as public servants could prove tricky, however.
It is worth recalling that the last protectionist to take office was Herbert Hoover. The reason is clear — both the United States and the world beyond it have dramatically changed since the 1920s, shifting towards a global inter-dependency model (or, as Thomas Friedman puts it, a “flat world”). Global business is not just for S&P 500 companies, either. Thanks to the great equalizer called the Internet, small businesses can now have a global footprint with low-cost manufacturing in one country and sales and distribution channels in many others.
Regulations that tax businesses with manufacturing operations overseas would therefore force a major disruption to the entire manufacturing sector, with small and medium-sized businesses that leverage international manufacturing particularly hard hit. And if small business is the great job engine we constantly hear it is, one can expect widespread job losses and few small to medium-sized manufacturing survivors in the Trump protectionist economy.
Even if low-cost manufacturing returns to the states for larger enterprises, the U.S. would face massive inflation as higher cost U.S. labor produces the things China brings us so inexpensively. That is, unless Trump forces labor unions to loosen their grip on wages and benefits, thereby widening the growing gap between rich and poor. (Just what we need.)
Trump also promises to build a wall and revamp immigration in order to improve job opportunities for Americans. In truth, the wall will more likely make it challenging to find the talent for jobs that need to be filled — especially those jobs filled by migrant workers that U.S. citizens are uninterested in filling. Again, inflation looms, with the price of a peach skyrocketing. On the other hand, with Trump’s “huge door” to allow in foreigners “legally,” one can safely assume that the high-tech industry, with its constantly growing need for highly skilled talent, will be well served.
In the Nov. 10 GOP debate, Donald Trump denounced the proposed Trans-Pacific Partnership with Pacific Rim nations, calling it a “horrible deal” and saying it will lead to “nothing but trouble.” He claims it will benefit China and move U.S. jobs overseas — despite the quote of the night from Rand Paul correcting Mr. Trump that TPP does not even include China. Once again, we see Mr. Trump’s bona-fides as, perhaps, the only protectionist in the Republican field.
Job creation is always an important talking point for presidential hopefuls — Trump included. Yet those of us in the business world understand that not all decisions that encourage business growth align with job creation. Mr. Trump has put his money where his mouth is by swearing off Oreos and vowing to never drive a Ford automobile (not that he would have otherwise) because these companies have announced plans to move manufacturing outside the U.S., resulting in hundreds of domestic jobs moving, too.
So the question becomes, what does “beating China” mean? What kind of deal will Trump make — one that grows corporate profits or one that grows employees? Can he do both with his protectionist bent?
It is a long time until we finally cast our votes, but one thing is for certain: The global trade and job-creation policies of the winning candidate are going to have a profound impact on the U.S. manufacturing sector, and Trump’s ideologies are the most unique in the field.
In the end, “President Trump” may well find that other reality show a little easier to manage than the one we’re all watching right now.
Commentary by Gary Meyers, the CEO of supply-chain analytics firm FusionOps.