BUSINESS LEADERS NEED TO SPEAK UP AGAINST TRUMP TRADE POLICY / THE FINANCIAL TIMES OP EDITORIAL

Business leaders need to speak up against Trump trade policy

Corporate America is failing to make the case for the international economic order

Andrew Edgecliffe-Johnson 




A year ago this month, America’s chairs and chief executive officers scrambled to leave Donald Trump’s business councils after his equivocal response to a deadly rally by white supremacists in Charlottesville. Now, though, some have decided it is safe again to be seen with the US president.

Mr Trump last week credited Indra Nooyi, PepsiCo’s outgoing CEO, with giving him the idea of having the Securities and Exchange Commission reconsider its requirement that companies report earnings quarterly. Other CEOs have shared beef tenderloin and lobster tail with the president at his Bedminster golf club in recent weeks.

They will have had much to catch up on: it has been an eventful year in the relationship between corporate America and a commander-in-chief who touts his pro-business credentials.

If they were looking to butter-up their host, the CEOs might have praised the tax reform package he signed in December, which cut the corporate rate from 35 per cent to 21 per cent and funded a record-breaking round of share option-boosting buybacks. They might equally have hailed his administration’s rollback of financial and environmental regulations.

But the year since Charlottesville has also been marked by CEOs diverging from the president on a number of occasions. On subjects as diverse and polarising as climate change, marriage equality, guns, race and immigration big business has found its voice, defining what Aaron Chatterji of Duke University’s Fuqua School of Business calls a new age of CEO activism.

But no subject has concerned business more this year than Mr Trump’s protectionist trade policy, and on this executives have remained curiously muted. The Bedminster dinner was a friendly one, according to one attendee quoted by Politico, but featured a presidential “rant” about China taking advantage of the US in trade that must have given many around the table indigestion. The US-led international economic order has worked out well for America’s multinationals, and upending the global trading system that underpins it threatens their cost bases and supply chains. You might think this is one subject businesses would find it easy to speak up about. Apparently not.

Analysts pushing executives to spell out how tariffs will hit their numbers have been greeted with reassuring forecasts about the next quarter and weak — if any — defences of free markets. Mary Barra told them blandly that at General Motors “we generally are free traders”, Apple’s Tim Cook made a brief argument that the world needed both the US and China to do well, and GE’s John Flannery hedged that while his company was built for free trade “that is obviously a subject of debate and discussion”.

The full fallout from Mr Trump’s tariff threats has yet to show up in most companies’ figures, and how many of them take effect remains up for negotiation. Yet CEOs seem torn between wanting to warn of the dangers of a trade war and not daring to frighten investors about what one might do to their stock.

“They’re very worried and quite articulate about the danger in private, but it is frustrating that they are remarkably unwilling to go on the record,” says Simon Johnson, a professor at the MIT Sloan School of Management. It is short-sighted, he says, but “who wants to stick their head up above the parapet if it hasn’t hit their numbers yet?”

When customers and staff are as divided as voters, any time a business speaks up it is taking a risk. According to a recent Morning Consult survey, 60 per cent of Americans want companies to stay out of political and cultural debates.

Prof Chatterji argues that the rise of populism, coupled with the loss of trust in big business since the financial crisis, makes it “thornier” for CEOs to stand up for capitalism. They are soft-pedalling their core economic beliefs because those beliefs “are not very popular right now”, he says.

CEOs cannot escape blame for that. While they were becoming social activists, they forgot to make the case for the rules-based global economic order that allowed their companies to thrive. Anger about rising executive pay has also undermined their ability to win over the shop floor. But that is where they should be making the argument, not in Bedminster.

Some business leaders have given up hope of changing Mr Trump’s mind on trade and hope Congress will act to soften the blow. But Congressional Republicans are largely standing with the president, and many of their Democratic rivals share his protectionist views.

Away from Capitol Hill, Mr Trump’s voters firmly back his stance and polling shows stronger support among Democrats for socialism than capitalism. Business risks losing the argument with both parties’ voters: until they can see the benefit in the system business hopes to defend, it will remain vulnerable.

This is not about CEOs siding against a particular president or party: it is about them making the case for the principles that will determine their companies’ success in the longer term — and reflecting on how business allowed support for them to become so fragile.