Seven Reasons Trump Is Not the End of the World – For Us and Procurement

As part of our Trump Day, Jason Busch, Spend Matters US founder, gives us his view of the key issues.

OK, I admit to being a political junkie. And no, I did not vote for Trump -- or Clinton. Both disgusted me on a moral level for debasing others and for their downright meanness. I believe we should each try to leave the world a better place each day than it is given to us. Both Trump and Clinton failed that test miserably, and the latter, in my view, in even more nefarious ways than the bombastic, locker-room language President elect.

But I digress. More important, as a US and world citizen with a strong degree of indifference around either of the candidates who competed in this election, I don’t believe the sky is falling. Nor is the election and Trump the end of the world for us, or for our profession. Here are seven reasons why:

  1. Who elected him – I take such issue with the notion that the racist KKK or anti-Semitic crowd put Trump in office. That’s like saying card-carrying “means justify the end” communists put President Obama in office (Bill Ayers, anyone?) In both cases, perhaps a small percentage of each set of extremists helped elected a President, in the latter case some who were actually murderers in the spirit of Lenin, Mao and Chavez. We tend to forget the danger of communists these days -- who are far more violent historically and just as morally bankrupt as white extremists if history, even recent history in Venezuela, is any lesson. But the majority voted – not the extremist minority alone. Even The New York Times issued an apology on the election for being out of touch in its coverage.
  1. Under Obama, the opening negotiating position around trade was “OK – let’s do it”. Trump’s opening salvos on trade need to be taken as just that – the start of negotiations. Where we end up won’t be where we started. But I do believe we’ll have more on-shore options down the line and healthier export economies as a result of not rolling over from the starting gate to countries that have driven exports up by threatening hardball but never having to play it. Until now.
  1. Environmental policy – the policy of the EU and Obama (I treat them as one in the same) was essentially: OK in Asia, not OK here. In other words, it was fine to trade with a region that broke their commitments to the environment, but production in our back yards was essentially a dirty, bad thing, and should be regulated to the greatest extent possible. For many reasons, optimizing for onshore and near shore production of basic materials and industry will be a good thing for the US and the earth. And hopefully the UK follows suit post BREXIT as well. Bring back steel to the UK? You bet.  And hopefully there’s a renaissance of base materials production in the US as well, with reasonable environmental policy that is a step up from Asia, but not curtailing the whole idea of onshore production. We need to be able to live with energy independence and production next door – not punt it away and hope it does not impact our planet. Environmental policy should be reasonable in accommodating just that.
  1. Economy – I still doubt President Obama could dissect a P&L or balance sheet, unless they were explained to him. Love or hate Trump in business, at least he understands how the mechanisms of capitalism – and that the purpose of business is not just to generate excess to redistribute it (as the saying goes, we all know what happens when you run out of other people's money). For the sake of the economy, a more balanced understanding and worldview on what it takes for small and large business growth alike will be a net positive – and for supply market health as well.
  1. Commodity markets – As I noted in a recent column, “despite a contentious U.S. Presidential race, metals -- and many other commodity -- markets move due to a range of factors. These contributing factors include: China demand, the strength of the U.S. dollar and the price of oil. The longer-term combination of these items will have the most direct impact on pricing. When we see stronger oil prices (e.g., above $50 per barrel) combined with decent demand in China, we can generally expect rising commodity markets … most of the base metals (aluminum, zinc, lead, nickel, tin, etc.) are in a bull market, with the exception of copper. We are seeing a floor beginning to form for steel products as well.”  Trump is inheriting a complex commodity market situation, and with a friendlier orientation for on-shore and near-shore mining and production, additional capacity will be a positive for procurement (even if “dumped” metals and other commodities must take a backseat due to trade actions, such as labeling China a currency manipulator and denying it market economy status, which Trump has said he would do -- and would, at least academically and accurately, be correct in doing so, even if pragmatically his words might best be served up with more nuance).
  1. Business Tax Policy – The US business tax situation is not sustainable, or smart. Trump gets this. As I recently wrote on Spend Matters, “I believe that under Trump, we’ll move to a closer balanced budget and a realignment of the business tax code to discourage “inversions” and drive tax parity with the rest of the world (i.e., lower taxes for businesses in percentage terms, yet higher tax receipts collected)”. We can generally say that for businesses, if history is any indication, a more tax-friendly environment, combined with tailwinds from less stringent environmental policy, more favorable trade policy, and most important of all, repatriation of trillions of dollars of capital which will become available for investment domestically -- if foreign cash stashes and tax amnesty for corporations is addressed along with it -- will ultimately spur investment and jobs in the U.S. From a procurement perspective, that should drive an expanding domestic supply market through business creation, investment and expansion.
  1. A UK Ally – The vote for Trump is as much a vote against “the Borg” as it is was discontent of the working class and non-urbanites in the states. As such, it is likely that Trump’s foreign policy will favor relationships struck in a unilateral manner with individual countries that share a similar balanced worldview and trade orientation as opposed to trading blocs like the EU. The UK has nothing to worry about here. Germany and the EU? Perhaps. Like China, one can make a strong case Germany has played the currency manipulation game at the expense of the US, cloaking itself under the EU to drive exports. Although harder to prove, it is likely Trump’s foreign policy team is likely to work more closely with the UK on encouraging trade between the countries, compared with those that have taken a more mercantilist approach to filing their own export coffers by any means possible.

So there you have it. The sky is not falling (except, perhaps, for those in the US illegally). It might not be a sunny day just yet on the global political and economic front with Trump – and by design, there are many storms brewing – but sometimes a deluge is needed to get the ground ready for the next season of growing.

Voices (2)

  1. Craig Knowles @ Market Dojo:

    Very interesting article and I agree with your views. Similarly, I’m not a trump supporter and found both of the candidates as morally reprehensible.

    Interesting that you put the environmental policy as third. Personally, I think that it is pretty obvious that the environmental stance of both the US and UK need to change.

    Either we rightly take account of the impact that our needs are having on the planet or as you mentioned we recognise that production can be dirty and simply get on with it. Although any environmental policy is essentially a balancing act, I don’t think I am alone in thinking that it is time to get off the fence.

    Hopefully trump will do just that. Hopefully..

  2. Lisa Reisman:

    To clarify metal market comments, copper is now also officially in a bull market.

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