Trump-onomics in Today’s Business Landscape
Konstantinos Paschalis
Regardless of how one frames him, Donald J. Trump is undoubtedly a controversial figure. With policy promises for the past 12 years being as eye-catching as his side-sweeping hairdo, he has certainly put his suave as a businessman front and center to entrench a pro-business attitude to policy making.
Undoubtedly a controversial figure, Source: Shutterstock
His approach has certainly seen some success for the economy during his term as president. Tax cuts that included a slash in the corporate rate from 35% to 21% rocketed the stock market to all-time highs and plummeted unemployment to its lowest rate in half a century.
But it’s not just Wall Street’s high society circles that garnered Trump’s favor. His work in reducing the regulatory burden and implementing the Paycheck Protection Program during COVID buoyed up SMEs, earning him a 65% approval rate from small business owners in 2019.
As he inches ever closer to a victory in 2024, would this approach to supporting American firms, large and small, fare as well under current conditions? Policy specialists and economists alike worry that Trump's policies of deficit financing would contribute to exacerbating national debt and inflation, with the debt to GDP ratio still at 120% and labor markets remaining tight after the pandemic. Even more catastrophic would be enacting the proposed 60% tariff on all Chinese imports, spelling disaster for US-based manufacturers’ margins.
Regardless, what firms will feel the most is the effects of Trump’s erraticness in all manners of policy issues. Even during his presidency, Nicholas Bloom of Stanford University observed “uncertainty shocks” to national output, as households save more to insure themselves against an unsure future. Severe cases can reportedly contract GDP by up to 2.5%, the exact rate the US economy grew by in real terms for 2023.
Uncertainty around policy directions can’t pair well with the development of America’s hottest asset, Artificial Intelligence (AI). The nation is home to the highest number of AI-related startups and firms in the world, with market leaders such as Google, Microsoft and OpenAI. The capital-intensive nature of AI development means most of these 15,000 firms require significant funding to develop their algorithms, most of which is raised externally.
The question is how externally. Although US-based AI firms were the target of 80% of American venture capital funding into the field, it remains uncontroversial for the former party to receive significant funding from abroad. Prominently, Sam Altman of Open AI has been seen discussing the partial funding of a $9 trillion investment into infrastructure for AI chip development with Sheikh Mahtoum, Dubai’s Prime Minister.
Altman (left) and Makhtoum (center) in Dubai, Source: Dubai Media Office on X
Hence, Trump’s unpredictability on foreign policy could hinder equity raising efforts. Except for Mahtoum, nationally affiliated parties such as the Saudi and Qatari Sovereign Wealth Funds are similarly keen on investing into American AI. Long-term deals can certainly be risky with fears of deteriorating national relationships under a Trump presidency.
Moreover, funding could not be the only issue. US-based AI researchers are known to co-develop their projects with international partners, most notably with Chinese institutes that collaborated with Americans on over 9000 publications between 2010-20. With Trump increasingly suspicious of China and other non-aligned nations, significant transnational partnership lines could be severed, further hindering AI expansion.
But perhaps the former president is now reformed with extensive experience in foreign policy during his term, leading to him making more stable decisions. His more seasoned advisors could also exert their influence to place his policy direction on a less volatile track. If these came to be, a Trump presidency could not hinder AI development after all.
However, this is unlikely to be the case. During Trump’s campaigning, his approach and messages surrounding foreign policy are perhaps even more extreme than before, with a larger embracing of the nationalist “America First” world view. The fabricated narrative of the “deep state” that led to a deep distrust of established, experienced politicians will also push the Republican incumbent to appoint loyalist, “yes-men” advisors if he were to be elected. He has gone on record stating that he wants his advisors to be “like German generals in WW2”.
AI-nxiety
Therefore, it is almost certain that AI developers could incur damages with a Trump election. Current tech optimism seems to overpower this message, with Altman recently going on record to state that “AI would be fine” irregardless of who gets elected, but it is time to reconsider this approach. Recently, Tom Glocer, the CEO at Thomson Reuters, suggested that many public comments from top executives suggest they are “backing away” from Trump, and that a Trump presidency “worries” him.
AI firms should probably heed these warnings. As a technology, AI is still at its infancy, requiring high capital expenditure that is further worsened by the increasing prices of the facilitating computer chips. And underestimating the size of the wrench thrown into their funding networks by Trumpian policies is undeniably a poor business practice in creating world-changing software. Firms, in AI and elsewhere, should be wary about a Trump presidency.