For most of the last three years, investors and business owners have backed President Trump’s handling of the economy, even if they disapproved of his disruptive leadership style. Trump cut taxes and slashed regulation, gifts to corporate America that boosted business income and stock valuations.
There’s almost no chance Trump could be so generous to business if he wins a second term, since the federal debt is soaring amid the severe coronavirus recession and trillions in new stimulus dollars. “At the beginning of the Trump administration, the agenda was squarely focused on market positives,” Ed Mills, Washington policy analyst for Raymond James, says in the latest episode of the Yahoo Finance Electionomics podcast. “That to-do list is done. Much of what could have been done is completed.”
Trump hasn’t outlined a thorough economic agenda for a second term, but he has indicated his trade fight with China could continue and maybe intensify. Trump has threatened a “decoupling” with China that could sever the trade relationship built during the last several decades. “Trade uncertainty is a market negative,” Mills says. “The market doesn’t like the potential for decoupling of the United States and China. One of the thoughts is that if he were to win a second term, he would follow through with some of the threats not completely followed through in his first term.”
Trump’s recent suspension of skilled-immigrant visas, known as H-1Bs, could be another preview of a second Trump term. Trump says coronavirus requires a temporary ban on H-1B arrivals, to protect Americans. But Trump has sought many ways to limit legal immigration during the last three years, and some executives think Trump is using coronavirus as a pretext for his anti-immigration crusade. Tech firms and other companies rely on H-1B workers to do programming and other technical jobs for which there’s a skill shortage among American workers, and big business is squarely against the latest ban.
Trump is also threatening new tariffs on imported metals and a trade war with Europe. For much of Trump’s presidency, pro-business measures such as tax cuts outweighed Trump’s protectionist impulses on trade. But Trump may no longer have sweeteners to offer the business community, to offset the heartburn he causes on trade.
A return to pre-Trump norms
This doesn’t mean businesses are rushing to support Trump’s Democratic opponent, former vice president Joe Biden. While not as hostile to businesses as Democrats such as Bernie Sanders or Elizabeth Warren, Biden still wants to raise the business tax rate from 21% to 28%, and impose a 15% minimum tax on businesses that report a profit to shareholders but use legal tax breaks to shrink their federal tax payments. He’d also end tax breaks for energy firms and other sectors.
But Biden could only impose such measures if he won and Democrats also clinched control of the Senate, perhaps a 50-50 likelihood, at best. And even then, it could be hard to raise taxes in the middle or immediate aftermath of a punishing recession.