How business owners are preparing for Donald Trump’s possible second term

when Donald Trump Left the White House in 2021, executives of major American companies breathed a sigh of relief. Now that he’s won the Iowa caucuses by a 30-point margin, they’re digesting the reality that this time next year Trump could be behind the Oval Office desk again. The Economist has spent the last few weeks talking to these titans. Some are very worried about the prospect of Trump 2. But others welcome the trade in calm anarchy.

People running large organizations have to be optimistic. They should look for opportunities when others panic. Managers have an uneasy relationship with President Trump, with many distancing themselves from his most outrageous statements and complaining about protectionism, even as they enjoy his more traditional policies. Republicans in Congress may talk about being pro-labor, but in practice they cut corporate taxes. It was hard for American companies to get hurt amid the stock market boom.

If Trump is re-elected, big business executives plan to bow (“Don’t Be Bud Light” is a frequent refrain, after beer brands fall victim to the culture war). They’ll avoid getting dragged into Trump’s business advice, they’ll avoid photos of the president, and they’ll devote themselves to making money. It is true that it would be bad for Western civilization if Trump sold out Ukraine by ending the war with Russia. But it will reduce the energy bill.

Besides, there are many complaints about Trump zealots in upper management Joe Biden. Mention Lina Khan, who oversees the Federal Trade Commission (the antitrust police), or Gary Gensler, who heads the Securities and Exchange Commission (the Wall Street police), and they’ll shudder. Biden wants to raise taxes on companies. His administration also wants to push ahead with Basel III “endgame” regulation, which forces big banks to hold perhaps 20% more capital on their balance sheets, appeasing animal spirits and hurting profitability.

However, this bullish defense of Trump’s economic management is satisfying. He fails to recognize that Trumponomics — a mix of deficit-financed tax cuts and tariffs — would work differently today. And it ignores how Trump’s more chaotic tendencies could threaten the United States, including its businesses.

In his first term, the economy performed better than many economists (including us) expected. That was partly because Trumponomics turned out to be more moderate than the campaign promised. The economy was also running below capacity more than previously thought, making it possible to cut taxes without curbing inflation. Strong overall growth and low inflation overshadowed the damage caused by Trump’s protectionism.

There is no evidence that Trump has updated his approach: he is still a man Tax cuts and debt. But the economic situation has changed. The Federal Reserve has been trying to reduce inflation for two years. Although it has almost achieved that, the labor market remains tight. Today, 2.8 million more people aged 25 to 54 are working than if January 2017 employment rates had been maintained. There were then 1.3 unemployed workers for every vacancy; Today is only 0.7. As a result, the economy is likely to overheat.

The budget is also in bad condition. In 2016 the annual deficit was 3.2% of GDP and debt was 76% of GDP. The projections for 2024 are 5.8% and 100% respectively. If Trump cuts taxes again, the Federal Reserve will have to raise interest rates to offset the stimulus, making it more expensive for businesses to raise capital and service rising public debt.

These are the conditions under which Latin American populists bully their central banks into keeping rates low, a practice Trump did last time. The Federal Reserve is supposed to be independent, but Trump will have the opportunity to appoint a puppet president in May 2026, and a flexible Senate could please him. The risk of higher inflation would rise, perhaps exacerbated by higher tariffs, which would also slow growth.

Many others have added to this great macroeconomic risk. Businesses will not welcome more trade restrictions, but some members of Trump’s circle have proposed tariff 60% on imports from China. Many companies love the federal government’s support for renewable energy (what Trump calls the new green scam). He has promised the largest deportation plan in US history to reduce the number of Illegal immigrants in the country. Besides causing misery, it would be a setback for a tight labor market.

As always, it’s very hard to tell what Trump will actually do: he has few fixed beliefs, he’s the boss. Chaotic And can change position several times a day. At a town hall in Iowa, he said he would be too busy in his second term to seek revenge against his political enemies. That was just hours after he sent an email with his own campaign subject line: “I am your punishment!” He could recognize Taiwan’s independence, which led to a crisis in Beijing and a blockade of the island. Or it could move away from Taiwan in exchange for China buying more goods from the United States. Companies often say that what they fear most is uncertainty. With Trump, that’s for sure.

This Unpredictability May make Trump’s second term worse than his first. His administration will lack establishment types like Gary Cohn, once at Goldman Sachs, to shuffle the president’s inbox and hide crazy ideas from him. More moments like the one on January 6 are possible, as is a full-blown revenge presidency. The idea that business leaders can keep a low profile and focus on Ebitda in these circumstances is fanciful. Employees, customers and the press will demand to know what they expect and what they want to do. The administration, in turn, may oppose any hint of criticism.

In the long run, the idea that corporate profits can be protected from social unrest is a fantasy. If Trump corrupts American politics broadly, and companies are seen to benefit from his rule, that poses a huge risk to them in the future. In Latin America, when big business has allied with autocrats, the result has generally been a discrediting of capitalism and an increase in the appeal of socialism. That seems unthinkable in the United States. But, until recently, Trump had a second term.

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