With the state visit by President Trump coming to a close, it’s a good time to reflect on how his presidency has changed the climate for businesses around the world, something that will in the long run have a greater effect than Brexit will.
With a policy focussed on protecting American jobs, American-located industries and America’s immediate interests, the president has dusted off an old but very effective toolkit for handling foreign policy issues – tax breaks for businesses, trade, market access and tariffs.
Perhaps recognising that the 1980s dream of free trade - where market forces and competition allow the best to rise to the top and the whole population to benefit from rising wealth - could not survive in the current era when China deploys an aggressive form of state sponsored capitalism, the world’s leading superpower has adopted a policy of jealously protecting its power.
It’s doing so by taking a leaf out of China’s strategic book, ceasing to play by the old European and American rules, altering the game to favour the biggest players and then using its economic might to ensure a successful future for America and Americans.
Inevitably other nations and trading blocs will copy this strategy, and we should watch closely efforts to control the flows of FDI, or to protect and promote local businesses in major infrastructure projects and government contracts. We should also keep an eye on the economic growth of countries with large populations - India, Indonesia, Brazil - as they seek to take their place alongside America and China as the top economic powers of the middle part of the 21st century.
When viewed as a competition to retain power, influence and economic might, the breakdown of collective global action in favour of local strategies begins to resemble a game of Risk played on a grand scale. It’s hard to see a return to the past operating model, once Trump is out the White House, whether in 2021 or 2025.
The actions of the past three years simply highlight that the old model of free trade had broken down under the pressure of rising powers willing to play by different rules - nation states are more likely to actively seek to protect their commercial interests, to play a larger and more direct role in their companies and to expect more of those companies in terms of their local footprint and their loyalty to the national cause.
This new environment will in turn change the rules of the game for businesses, both domestically in Brexit Britain and in their global operations – they will need to have plans for localisation, taxation, onshore production and government support. In a new state-sponsored future there will be some high profile losers and individual businesses will need to be careful to ensure they are not among the ones left behind or caught in the cross-fire (think Huawei). But those that adapt to this new environment early will reap the dividends in ten or 15 years’ time, long after the current political uncertainty has passed.
Image credit: James Guppy via Flickr