Trump’s “America First” Inauguration

Donald J. Trump has taken the oath of office as the 45th President of the United States, marking a decisive shift in both foreign and domestic policy – not only with the outgoing Obama administration, but also with decades-long bipartisan norms and traditions.  Trump’s inaugural address included bold statements on all four of the areas that FSG has highlighted to our clients based on their global ripple effects: Trade, Immigration, Security, and Infrastructure. If Trump’s core campaign stances have been “moderated” by more “practical” Republicans on Capitol Hill, you couldn’t tell it from today’s speech.

In many ways, President Trump’s speech seemed designed to communicate to two different audiences with the same words. On the surface it was an address to the nation as a whole, emphasizing broad themes of national renewal. But by doubling down on his key campaign themes, Trump spoke most clearly to the swing voters who delivered the election to him: those who have been left behind by globalization, automation, education, and urbanization.  Regardless of what experts may believe about the wisdom or workability of Trump’s policy stances, there can be no doubt that he wants those “forgotten Americans” so see him on their side for the next four years.

Regarding FSG’s Global Outlook for 2017, today’s address reinforces our base-case view: America will step back from its 70-year role as guarantor of global peace and prosperity, focusing instead on prosperity and dynamism at home (with American citizens’ identity and employment clearly taking pride of place over immigrants and foreigners). This outlook has been reflected in the global forecasts in our FrontierView dashboards, notably increasing our US GDP growth forecast for 2017 to 2.1% based on expected tax cuts and regulatory reforms sparking a burst in business investment.

Given the US’s weight in the global economy, we have also increased our 2017 global growth forecast to 2.8%. Clients can find much more detail about the expected effect of Trump’s foreign policy in an early refresh of our Regional Outlook and Global Outlook reports across the next several weeks (Central Europe having just been released today).

The greater challenge for international business in 2017 will be managing and monitoring risk emanating from Trump’s unpredictable, often-confrontational approach to policy and relationships. Of our seven Events to Watch for 2017 that could significantly disrupt the global performance of multinational corporations, four would be most likely to be instigated (possibly unintentionally) by Trump administration actions.

For a quick overview of the key attributes driving these disruptive events, review our ongoing blog series by FSG’s Practice Leader for Global Economics Antonio Martinez:

  • RIP Pax Americana (downside scenario): Weakening of the US security umbrella from Eastern Europe and the Pacific opens the door to sudden conflict and commercial disruption.
  • Workforce Localization Crackdown (downside scenario): Immigration restraints become more aggressive and mainstream in many major countries, limiting not only access to low-cost foreign workers, but also constraining companies’ ability to access and deploy top expat talent.
  • US Infrastructure Boom (upside scenario): Substantial direct spending by the US government on infrastructure – in areas that would not be viable for purely commercial projects – presents upside potential to our US forecast.
  • Trump Trade Chaos (downside scenario, coming next week): Negotiations and diplomacy with Mexico or China break down, leading to escalation of tit-for-tat trade barriers and greater uncertainty for corporations on the cost of accessing foreign markets and managing international supply chains.

As always, we stand ready to help our clients monitor risks and reinforce their plans – more important than ever as America’s role in the world is redefined under Trump. Please contact your client services director for more information to arrange a leadership briefing.

Clients can access the full Events to Watch for 2017 report on FrontierView hereNot a client? Contact us to learn more.

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