US election: Prospect of President Trump heightens business and trade uncertainty

As the world’s economic powers and international businesses take stock of the US presidential election result, the Trump Administration looks likely to have a major impact on key areas such as immigration and trade, should his campaigning rhetoric transfer into US government policy.

He has also suggested that he would seek to add a new requirement that companies find US employees before hiring foreign ones. However, Monika Szabo, a partner specialising in US immigration issues at PwC in Toronto, says the logic of such policies would not stack up. ‘His rhetoric doesn’t make any sense as the prevailing wage is not set by governments, it’s set by companies and it depends on the specific company, industry, location and the relevant cost of living,’ she says. ‘Once you get an H-1B you can work but you must be paid the prevailing wage. It’s not like companies can get foreign workers for less. If anything they have to pay them more.’

Szabo says such measures are unlikely to go down well with business. ‘There are only 65,000 H-1Bs available every year and they’re always oversubscribed – last year I think there were at least 200,000 applications – therefore the odds of getting one are not great anyway. What Big Business wants is to raise the cap, but that doesn’t play well with local constituents who interpret such measures as taking away their jobs. While many of these policies are not wholly unreasonable, if he wants to appease industry that is foreign-worker oriented, this wouldn’t be taking away the need for a visa, but adding yet another administrative burden for companies.’

In terms of business and regulation, Trump’s well-documented criticism of Amazon’s ‘huge antitrust problem’ and pledge to block AT&T and Time Warner’s proposed $85.4 billion merger have raised concerns. Janet McDavid is a partner in Hogan Lovells’ Washington office and Co-Chair of the IBA Antitrust Committee. ‘A Trump Administration’s positions on antitrust enforcement are difficult to predict,’ she says. ‘Based on his history and his campaign rhetoric, I expect to see a mix of traditional Republican caution in non-cartel cases, such as mergers or civil conduct investigations, with some potentially unpredictable aggressive enforcement decisions – perhaps involving industries that Trump mistrusts, such as the media, or entities with which he has had a negative experience as a businessman.’

Although it remains unclear how much emphasis the president-elect’s administration would place on international antitrust coordination and competition advocacy abroad, McDavid says it’s vital that the US continues to lead the way when it comes to international cooperation. ‘Antitrust has been one of our most successful exports and well over 100 countries now have their own antitrust laws. This growth, combined with the increasing integration of the world economy, makes cooperation between antitrust agencies around the globe more essential – and more complex – than ever. The US must be a credible advocate for the view that the antitrust laws should only be used to protect consumers from conduct that threatens to stifle competition and innovation. The US president is a position that imposes awesome responsibility and the enforcement of the antitrust laws has a significant impact on our economy and the world economy.’

On the subject of international trade specifically, there is scepticism that the President-elect’s more bullish rhetoric will inform policy. Eric Emerson is a partner at Steptoe & Johnson (in the firm’s Washington and Beijing offices) and senior vice-chair of the IBA International Trade and Customs Law Committee. ‘It seems likely that his most extreme positions – a 45 per cent tariff on all Chinese imports, withdrawing the US from the WTO – won’t come to pass.’

Emerson does, though, believe the President-elect is likely to honour his tough stance on trade enforcement against China. Threats by Trump throughout the campaign that he would be prepared to hike tariffs on Chinese imports, bring trade cases against the country and officially declare it a currency manipulator have perhaps fuelled the most concern when it comes to US trade relations. ‘This could come in the form of trade restrictions through the US’s Section 201 “escape clause” provision, or it could come in the form of even greater enforcement of US anti-dumping duty or countervailing duty laws, or both,’ he says. ‘As a candidate, Trump also promised more WTO cases against China in the coming years. But building those cases takes time, and they are not at all easy to develop either legally or factually.’

Emerson also points out that China wouldn’t take such policies lying down. ‘In terms of a response, China may take some of these measures in its stride. But, if the US presses too hard, we should expect to see some pushback either in the form of China closing its markets to US exports, or in the form of increased penalties on US business operating in China.’ This would be bad news for many US companies since China was the US’s third-largest goods export market in 2015 and remains the country’s largest goods trading partner.

Emerson believes the Trump administration will have a more immediate impact on certain international trade agreements. ‘First, President-Elect Trump has announced his intention to pull the US out of the Trans-Pacific Partnership (TPP) on his first day in office. Even if some effort is later made to renegotiate this agreement, it seems a near certainty that the US will not ratify this agreement in anything like its current form during a Trump Administration.’

The US signed the TPP in February alongside 11 other countries following seven years of negotiations. ‘I also expect that our other existing trade agreements, including the North American Free Trade Agreement (NAFTA), will come under scrutiny for possible renegotiation. And as for US trade policy overall, it is surely the case that over the next four years, the US will be turning away from a trade policy that stresses openness and reduced barriers, toward something more protectionist.’

This, says Emerson, is arguably the biggest challenge facing international trade once Donald Trump assumes office on January 20 2017: ‘The US has been a world leader in advocating policies in favour of open markets. If the US pulls back from this important commitment, other countries will surely follow, since it’s far easier for governments to accede to domestic political pressures that favour protection than it is to press for free and open markets. It is now up to the world’s other major economies to continue this fight in the hope that the US will soon return to its position as a leading advocate for this important goal.’