“California Farmers Backed Trump, but Now Fear Losing Field Workers,” read the headline on a New York Times story last week. Big agribusiness types in the Golden State who thought President Trump would reduce regulation and taxes are now coming to grips with the fact that his executive orders on immigration could destroy their business model, which relies on the availability of workers who are not in the country legally. And, no, the wages these farmers pay to radicchio pickers aren’t high enough to lure underemployed working-class citizens to the fertile fields of the Central Valley. Still, farmer Joseph Marchini hopes that because Trump is a businessman himself, he’ll somehow understand that farmers’ massive investments in agriculture rest on the status quo. “I’m confident that he can grasp the magnitude and the anxiety of what’s happening now,” Marchini told the Times.
Expect to hear more of this, in sector after sector. Industry leaders and entrepreneurs who thought that Trump and his policies would be “good for business” are suddenly realizing that, actually, the president’s attitudes and herky-jerky policy moves will in fact be very bad for their particular businesses. And despite the available evidence, they’re still holding out hope that he will eventually help out their bottom lines.
In the case of big farm operators, this seems kind of obvious: Ejecting undocumented workers from the U.S. was one of the main drivers of Trump’s campaign. But this kind of cognitive dissonance doesn’t arise because businesspeople are stupid. It’s because they don’t follow policy that closely, because they assume rational policymakers won’t change rules quickly, and because they share certain assumptions.
There is a general sense among businesspeople—constantly reinforced on the Wall Street Journal op-ed page, at Chamber of Commerce meetings, at trade shows and conventions, on financial television, in MBA programs, on the golf course—that Republicans are good for business and Democrats are bad. It’s something many people in business instinctively feel and know. And it makes sense. Republicans generally favor lower taxes on capital and income and less regulation, while Democrats generally favor more of both. Republican politicians are more likely to be surrounded by businesspeople or to be businesspeople themselves. George W. Bush was famously the first president to have an MBA. Donald Trump is a hyperaggressive businessman, and his cabinet is stocked with successful corporate executives, entrepreneurs, and financiers.
Which is one of the reasons the stock market, which represents professional investors’ view on the future prospects of American business writ large, has risen by several percentage points since Trump’s election.
This Manichean view of the relationship between political parties and the performance of the stock markets and the economy is, of course, wrong. For much of the last century, the stock market has done better under Democrats than under Republicans. The worst events for the market—the crash of 1929, the crash of 1987, the financial crisis of 2008—all came on the heels of eight years of Republican rule. There have been four recessions in the last 36 years. Each started when Republicans were in the White House.
We don’t yet know the effect of Trump’s policies on macroeconomic growth. But a mere four weeks into the Trump administration, we have already seen several examples of how Trump’s policies and modus operandi are actually proving to be bad for specific businesses in a very concrete way.
Executives in the travel and tourism and leisure industry probably thought Trump would be really good for business. (Sheldon Adelson and Steve Wynn, who both own massive, tourist-dependent casinos and hotels, were among Trump’s biggest CEO supporters. And in early 2016, Virgin America CEO Steve Cush expressed his preference for Trump over Clinton. ) Trump, after all, owns golf courses and hotels. He was in the leisure business himself—and continues to be. And yet one of Trump’s first moves was to introduce costly chaos into the system that ferries visitors to and from the United States. Perhaps not many of the refugees and nationals of seven majority-Muslim countries affected by Trump’s now-stayed travel ban will be staying at Disney or a Marriott. But airlines have already absorbed significant costs from flight delays and from staff time occupied in pulling people off planes and reissuing tickets. And if you start blocking Canadian citizens who happen to have Moroccan parents from entering the country, word starts to get around. A business travel group last week suggested the travel ban has cost the industry $185 million in lost business. The data the U.S. government produces on international tourist arrivals is reported with a several-month time lag. But, as Time reported, the travel app Hopper.com found that the number of weekly searches for flights to the U.S. fell from 61.5 million just before Trump’s inauguration “to 56 million during Trump’s inauguration week, before falling to 50.9 million after the travel ban was ordered.” That’s a decline of 17.7 percent. We’re less than a month into the Trump presidency, and the travel, tourism, and leisure businesses may already be suffering from the fallout.
Or consider the home-building and construction industry. Among the big-time executives to endorse Trump were Bernie Marcus, the co-founder of Home Depot, and Trump’s close friend Tom Barrack, the founder of megadeveloper Colony Capital. Trump received a positive response when he addressed the National Association of Home Builders last August, which was no surprise: Trump is a builder, a developer, a real estate guy. Surely having a fellow builder in the White House would be good for business. But since Trump’s election, bond investors, reasoning that Trump and the GOP Congress will cut taxes while increasing spending, hence driving up the deficit and perhaps igniting faster growth, have pushed interest rates up sharply. The interest rate on the 10-year government bond spiked from 1.8 on Oct. 31 to 2.6 on Dec. 12, an increase of 44 percent. Mortgage rates have followed suit. Oh, and in one of its first acts, the Trump administration cut a subsidy for people taking out loans from the Federal Housing Administration.
Guess what happens when it becomes more expensive to borrow money and make down payments? As interest rates on the 30-year mortgage have spiked, mortgage applications have fallen. After having risen sharply year over year through 2016, housing starts in December 2016 were flat with December 2015. New home sales fell 10 percent in December from November and were down slightly from the year before. Existing home sales fell as well in December and were flat from the year before. Oh, and the crackdown on immigrants—legal and illegal—is likely to make it even harder for construction companies in the Sun Belt to find workers. Less activity and lower margins!
It goes on and on. Insurers surely figured a government run by congressional Republicans and President Trump would be good for their bottom lines—they’d slash regulations and reform Obamacare in a way that would make it easier for them to rack up profits. But some 17 insurers have sued the government because Republicans in Congress denied “risk corridor” payments due to some insurers under the Affordable Care Act. And it is unlikely President Trump will lift a finger to help these companies recoup the billions of dollars they are owed.
This pattern is likely to continue. CEOs tend to have a pretty narrow focus: They don’t pay all that much attention to what is going on in other industries. And Trump continues to surround himself with Wall Street types like Gary Cohn, late of Goldman Sachs, who offer vague promises of cutting taxes and shredding regulation. It’s easy for executives, and investors, to latch onto such promises—and some tax cuts and regulatory reform will surely benefits businesses generally. But particular businesses will continue to be disappointed by other policy moves. Who will be disappointed next? My bet is on the big construction and equipment companies, who believed Trump’s promise to build a giant wall along the Mexico border and plans to spend $1 trillion on infrastructure would funnel giant contracts their way.
They would do well remember the immortal words of Tim Matheson’s Otter in Animal House: “You fucked up. You trusted us!”