Trump’s America: What it means for UK managers

09 November 2016 -

Some are calling it America’s Brexit. Promising always to put America first, to generate American jobs, and to renegotiate trade agreements, Donald Trump is now the US’s president-elect, due to succeed Barack Obama in 2017. CMI was ahead of the game in envisaging such a possibility, so what does a Trump presidency mean for the UK?

His chances were rated 150-1 by bookmarkers at one point. Yet Donald Trump’s rise to power and the presidency has been a phenomenon, deploying unconventional campaign tactics, a larger-than-life personality and galvanising grassroots support from those who have traditionally not voted. With these, he has defied his critics and won the keys to the Oval Office.

While European stocks rallied after an initial dip this morning, Prime Minister Theresa May led UK political congratulations for Trump, stating that Britain and the US had an "enduring and special relationship" and would remain close partners on trade, security and defence.

Her colleague, Foreign Secretary Boris Johnson, who was a key figure in leading the similarly stunning Brexit campaign in the UK, tweeted: “I believe passionately in the importance of the UK - US relationship and am confident we can take it forward together.”

In addition to having family and business ties to the UK, Trump has also repeatedly stated his intention to maintain the “special” transatlantic relationship. But with many questioning his lack of experience and temperament to hold high office, many have expressed disquiet about how America will interact with the UK, and the rest of the world.

A nation run like a business

While Trump’s initial policy moves are still to be revealed, he has already stated his intention to run the economy “like a business” by lowering personal and business taxes and encouraging American companies to keep their operations, and their jobs, in the US.

He has also pledged a reduction in federal corporate tax from 35% to 15%, as well as seeking to prevent US companies moving their corporate headquarters abroad to avoid US taxes; and to eliminate carried interest tax – a tax that mostly benefits hedge fund investors.

Interestingly, CMI raised the possibility of US isolationism as long ago as 2008, in its Management Futures report. This was the scenario painted back then:

The World Ignored by the US: After economic hard times a totalitarian regime arises in the US and dictates business rules very restrictively. Boundaries are closed in order to hold off everything ‘foreign’. The political agenda changes from ‘America first’ to ‘America only’.

In these circumstances, of the US prioritising greater home-grown production, and closing off boundaries to foreign business interests, CMI’s 2008 report advised managers in UK companies exposed to the US market to build a strong customer base outside the US to counterbalance some of the impact.

So eight years on, what does a Trump presidency and a potential “America only” outlook mean for UK managers?

Despite saying that he’s willing to walk away from existing trade deals such as the North American Free Trade Agreement (Nafta) between the US, Canada and Mexico if a good rearrangement cannot be reached, president-elect Trump has reached out to the UK, stating that a ‘Brexit Britain’ would be offered a free trade deal before the rest of the European Union. (Notably, Prime Minister Theresa May has studiously avoided criticising Donald Trump during the presidential campaign, and it may be that the UK benefits as a result.)

Christian Stadler, professor of strategic management of Warwick Business School, says that UK businesses may benefit from setting up part of their operations in the US, if Trump’s claims become policy.

Professor Stadler, who researched nine of Europe's biggest and oldest companies for his book Enduring Success, said: "Trump's victory brings a similar uncertainty as Brexit did. We simply don’t know which of his campaign promises will translate into policy.

"For UK business it is a particularly big threat as trade with Europe is likely to decline as a result of Brexit, so companies have to offset business losses, but the US will also be a more difficult place to trade with.”

"Trump has spoken out against free trade, so expect a dramatic rise in import duty in some industries, such as steel,” he added. "We can expect substantial investment in US infrastructure, but this is not likely to benefit UK companies as contracts are likely to go to US companies.”

What is certain is that British managers must prepare for the changes that are bound to come. This is a time, as with Brexit, for level-headed management, reassurance amid uncertainty. It’s time to show clarity and proactivity. Yes, the world is living through turbulent times, but professional managers can always maintain control over the issues that affect them.

Writing in the aftermath of the Brexit vote, CMI chief executive Ann Francke said the result represented how many people “feel out of touch with today’s leaders, and a broader breakdown of trust in politicians and business...

“More than ever, leaders need to bring people together, not pull them apart.”

This, said Francke, “means creating a strong sense of purpose and listening to people’s concerns. Leaders will be challenged to create clarity out of complexity, to communicate clearly and to engage employees at every stage of the journey”.

Trump’s status, as a non-career politician and an outsider to the Washington elite, is yet another example of how trust in the establishment is dwindling. This, in itself, is another reason for business leaders to be strong and inclusive in their decision-making in the future.