Coal miners and alienated workers just trumped corporate America.
By canceling America’s participation in the 2015 Paris climate agreement, President Trump snubbed many of the nation’s biggest businesses. Corporate giants including Exxon (XOM), General Electric (GE), Apple (AAPL), Microsoft (MSFT) and Alphabet (GOOGL) urged Trump to stick with the agreement, which nearly every other country in the world has signed on to. Tesla (TSLA) CEO Elon Musk said he’ll quit as an informal White House adviser on account of Trump’s decision to withdraw. The only major businesses supporting Trump’s move are energy firms dependent on coal and oil.
“The Paris accord is very unfair to the United States,” Trump declared at the White House on June 1. He claimed the agreement imposes “draconian financial and economic burdens” on the United State, while linking it to the loss of nearly 3 million jobs–a claim economists strongly dispute. Trump did say he was open to re-entering the Paris agreement under different terms, leaving some wiggle room amid the criticism he is sure to get for the decision.
Withdrawing from the deal probably won’t be as catastrophic for business or the climate as overheated news coverage might suggest. The Paris deal relies on voluntary reductions in carbon emissions, according to standards each nation sets for itself. Countries can change their standards or simply not abide by them. Enforcement is weak, at best. And market incentives to adopt cleaner energy are becoming stronger, in some cases obviating the need for government incentives or mandates.
A headache for American businesses
But abstaining from a global agreement embraced by every other developed economy is a headache for American businesses all the same. Multinational companies want to sell their goods and services everywhere, which is easier when their home country is following the same agenda, more or less, as other countries they want to sell to. The Paris agreement will likely spur spending on new climate-friendly technologies, and US firms want a cut of that as well. They could lose out to foreign firms whose home governments do more to cultivate such technologies.
By appeasing America firsters and legacy industries such as coal, Trump has obviously fulfilled a campaign promise, while demonstrating solidarity with workers stuck in fading 20th century industries. But that will do nothing to increase demand for dirty coal or create jobs in industries the free market is closing the books on anyway. Natural gas burns much cleaner than coal and is nearly as cheap, thanks in large part to America’s fracking revolution. Pollution-free solar power is becoming cost-competitive without any need for government incentives. States such as California and many municipalities have their own reasons to encourage the use of renewables and cleaner-burning fuels, regardless of what Trump wants. That’s why Exxon and many other oil companies favor the Paris agreement—it helps them gain a foothold in the energy market that is slowly but surely replacing carbon.
Trump probably could have found different ways to help the beleaguered coal industry—powerful federal incentives to draw companies to coal country, say—while keeping American firms under the Paris umbrella. But he disregarded the pleas from corporate America, with no apparent concern for whether that could impede economic growth or cost American jobs. At some point business leaders must rightfully ask whether Trump represents their interests or not.
Trump rode to Washington on a pro-business platform, but his actions in office haven’t been so business-friendly. He has left health insurers and other companies in the medical industry deeply uncertain about the business climate they face, since he has vowed to dismantle the Affordable Care Act without an obvious replacement. Insurers are bailing out of ACA markets where they can’t make money, a problem that existed before Trump took office but has since gotten worse.
Trump has threatened the auto industry with tariffs and other punishments (and consumers with higher car prices) if they don’t create more American jobs. He has lambasted pharmaceutical firms for their high prices. His threat to tear up the North American Free Trade Agreement would roil thousands of business that rely on those trading relationships. He may still seek tariffs on Chinese imports, as he has frequently threatened, which would upend supply lines for many other US companies.
Offsetting all of this, from a CEO’s perspective, is the promise of tax cuts and deregulation, two of Trump’s top priorities. Tax cuts could directly boost corporate profits and stock prices along with them. Deregulation could lower the cost of doing business, which is almost as good as a boost in net income.
But Trump obviously faces difficult challenges getting major legislation through Congress, and he’s adding to the burden with controversies such as the Russia investigation, weakening his political hand and overburdening Congress. It’s now unlikely Congress will pass any kind of tax reform in 2017, and the longer it drifts toward next year’s fall election season, the less likely it becomes. Trump has undone some minor regulations with executive orders, but major pruning would require Congressional action, and that is nowhere to be seen.
Take tax cuts and deregulation away, and Trump looks more like a self-preserving political boss playing favorites than a businessman-president. He favors downtrodden industries on their way out over ascendant industries such as technology and renewable energy, because that’s where his “base” resides. He talks up the need for stronger growth while explaining away political decisions that could impede growth. And he accepts symbolic wins that save a few endangered jobs without talking at all about how to create and secure the jobs of the future. Eventually, we’ll need them, because you can’t prop up the jobs of the past forever.
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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman