Risk is business poison … and Trump is risky

With every passing day, it seems more and more like the president of the United States doesn’t understand the business costs of risk and instability.

And not only the U.S. is going to feel the results of that blind spot.

It’s true that people do make money in unstable times — especially, as seems to be happening in the United States, if you know about significant government changes in advance, and tailor your stock purchases and sell-offs accordingly.

Much money has been made by anonymous traders (you could legitimately suspect inside traders) who have magically decided to dump stocks just before U.S. President Donald Trump has made sweeping or unexpected tariff decisions, as it has been made on oil plays by speculators who seem to know when military actions are about to take place.

But on the whole, businesses don’t invest during times of turmoil unless they can see clean, clear opportunities. Instead, they plan and retrench: they hold their cash reserves close, tighten up the amounts they spend on their workforces, back out of low-performing operations.

Fast food chains are a bellwether: so far this year, Papa John’s pizza has announced the closure of 300 North American locations by 2027, Wendy’s is in the midst of a wind-down of underperforming locations that could top 350 restaurants, and Starbucks is trimming 124 storefronts and dropping 900 corporate staff as part of a US$1-billion restructuring.

It’s just not good business to roll the risk dice and hope they will come up your way.

Think about it this way: there are major companies that have promised to reshore manufacturing in the United States — the Trump government boasts of billions of dollars of commitments.

But if you’re a company president watching tariffs first get applied by Trump, then get removed by the U.S. Supreme Court, then get reapplied by Trump under an even more abstract interpretation of some piece of rarely used dusty U.S. legislation, chances are you’re going to dog-walk any actual construction of a new American plant for as long as you can — at least until the dust has finally settled.

The tightening up is limiting expansion, and with it, jobs.

And a huge amount of the fallout of uncertainty is getting backstopped by the American taxpayer, and anyone willing to loan money to the U.S. government. Something close to US$200 billion in tariffs currently have to be refunded, and the U.S. government has to pay interest of, this year, six per cent on improperly collected tariffs as it works out who to repay, and how. The war in Iran is, by some accounts, costing an estimated US$1 billion per day, and a huge volume of high-cost armaments are being used and will have to be replaced.

Not only that, but there are the costs of the fallout of an international conflict: Trump’s promise to use U.S. armed forces to protect tankers transiting the Strait of Hormuz, his promise to use government intervention to make sure higher gas prices don’t hit Americans, and his promise to provide backstop currently unavailable insurance for tanker traffic “at reasonable rates” through an American government agency all put the U.S. government on the hook with new fiscal risk.

Then, there are the global effects and warning signs: uncertainty over the U.S. war with Iran is driving up oil prices, causing fears of shortages and also causing downstream producers — like South Korea’s Yeochun NCC Co. — to announce that they are moving petrochemical production to minimum levels. Yeochun is one of the top petrochemical raw material producers in the world, and its production wind-down will clearly have significant downstream effects.

It’s just another result of uncertainty. And while it will affect the world, it’s made in America.

» Winnipeg Free Press