Philippa Kaur

When Donald Trump left office three years ago, still huffing, puffing and plotting to overturn the results of the 2020 presidential election, the leaders of most of America’s biggest corporations were only too happy to see the back of him. They wore their moral outrage like a badge of honour. Sure, they had conveniently put aside their earlier scruples about Mr Trump’s suitability for the White House, bought off by generous corporate and personal tax cuts in 2017. Sure, many had cravenly turned a blind eye to his torching of environmental rules in support of a broad-brush regulatory bonfire. But his attempts to subvert American democracy, and the storming of the Capitol by his supporters on January 6th 2021, were a step too far.With unusual unity, they huffed and puffed back. Manufacturers called the riots a “disgusting episode”. The Business Roundtable, a lobby group for big companies, called on Mr Trump to “put an end to the chaos”. Some prominent firms pledged not to provide financial support to the 147 Republican lawmakers who had refused to certify Mr Trump’s defeat.Mr Trump’s runaway victory in the first bout of the Republican primary contest in Iowa on January 15th cemented his status as the party’s presumptive nominee. The polls suggest that in a head-to-head battle with President Joe Biden, he would win. But if there are murmurings of alarm about what a sequel to his chaotic presidency might mean for corporate America, this time they remain behind closed doors. Recently Larry Summers, the pro-Biden former treasury secretary, urged CEOs to reject Mr Trump, noting that Italy’s markets did well in Benito Mussolini’s first few years in power—until they didn’t. Yet for the moment, most advisers and leaders of business associations counsel bosses to keep their heads down. Forget Il Duce. The message is: duck and cover.There is rationale for lying low. For a start, with ten months to go before the elections, anything can happen. Health issues could force either candidate out of the race (combined, Messrs Biden and Trump have had 158 years on Earth, nearly two-thirds the age of America itself). Mr Trump has not only his Republican rivals and Mr Biden to contend with, but 91 felony counts across two state courts and two federal districts. Staking out the moral high ground from corner offices may also be counter-productive. It could backfire on those who attack Mr Trump in public, and bolster his anti-elite appeal. In office, he was quick to retaliate when attacked (preferred weapon, CAPITALISED TWEETS!). With trust in big companies on the wane in recent decades, it has become easier for populists to whip up an anti-business hue and cry. The head of a prominent business organisation ruefully admits that if he took a public stand against Mr Trump’s campaign proposals, “the former president would be delighted.”In the past few years, as the relationship between big business and Mr Trump’s MAGA Republicans has soured, executives have learned the hard way the risks of sticking their necks out. A public-relations adviser to CEOs thought a year ago that it would be relatively easy for business to disown Mr Trump because of his legal travails. But then came the unofficial boycott of Bud Light, a beer, by right-wing culture warriors offended by its marketing campaign with a transgender influencer. The PR man realised the power of the mob to hurt the bottom line. “We are back to walking on eggshells,” he says—caught between progressive employees and customers demanding that firms take a stand against Mr Trump, and fear of the MAGA masses.Then there is Mr Biden. When pushed to express a preference, many businesspeople say they see him as a steadier pair of hands in policymaking and geopolitics. But they are fed up with his administration’s anti-business rhetoric (Gina Raimondo, the commerce secretary, is an honourable exception). That makes them more tolerant of Mr Trump. Of the two, Mr Biden is “hands down a bigger threat to prosperity”, says a billionaire financier.Even Mr Biden’s backers rail against the ”big is bad” stance of his trustbusters. Those trustbusters’ bite has not been as bad as their bark; many of their cases have failed in court. But the bark alone has chilled dealmaking, laments an investment banker. As for the risk that Mr Trump could “weaponise” administrative agencies against his corporate enemies, Neil Bradley of the US Chamber of Commerce counters that Mr Biden, too, has urged his administration to crack down on “junk fees” and price-gouging in industries ranging from airlines to banking and health care. Mr Bradley draws few distinctions between either party’s economic populism.Some businessfolk angrily dismiss efforts to draw parallels between the dangers of Mr Trump and Mr Biden. Calling it “whataboutism”, they quietly profess to be terrified by the prospects of a second Trump administration. In the first one, the former president may have pushed radical policies, but sensible conservatives in his administration, as well as his own predilection for chaos, got the better of him. Now he is surrounded by true believers, such as the Heritage Foundation, a pro-MAGA think-tank whose job, says one business leader, is “to prevent the amelioration of the Trump agenda”.In other words, Mr Trump has people in place to advance a plan that could shake up the economic framework on which American business has prospered for generations. The pillars of that plan of most immediate concern to corporate America are trade, migration, the fiscal deficit and clean energy.The levy brakesA trade war is the most palpable worry. The self-described “Tariff Man” has floated the idea of imposing a baseline 10% levy on all imports. These would be raised, “an eye for an eye”, in retaliation against any country with a higher tariff. China is the main target. Businesspeople fear his goal is unilaterally to terminate trade with China, which would be a nightmare for any firm exposed to the country. Such a trade policy would be far more draconian than that of the Biden administration, which has kept Mr Trump’s tariffs but worked with allies such as Japan and the Netherlands to restrict export of strategic goods such as advanced semiconductors, without cutting China off altogether.Some hope that Mr Trump is posturing. They take solace in the fact that Congress, not the White House, regulates commerce and that courts adjudicate trade law. Yet Kent Lassman, who contributed a bold essay in support of free trade to the Heritage Foundation’s pro-Trump “Project 2025” road map, thinks the former president means it, even if it disrupts America’s existing trade treaties. Mr Trump “is not changing his stripes”; his sense that everything is a deal and that America is victimised is stronger than ever. His chief advisers on trade, protectionist hawks such as Robert Lighthizer and Peter Navarro, “know how to play off of those beliefs”, Mr Lassman says.Mr Trump’s threat to round up and deport millions of undocumented migrants has also alarmed businesses—not only for humane reasons but because of a chronic worker shortage. In November America had 8.8m job openings. The number of unemployed is 6.3m, notwithstanding a recent surge in migrants crossing over the southern border. Mr Trump’s harshest proposals would be hard to implement. He made a similar mass-deportation promise on the campaign trail in 2016 but was frustrated by court challenges and other pushback. Still, any pickup in expulsions could hurt industries such as farming, leisure, retail and hospitality that rely on low-cost labour, executives say. However important it is to maintain strong borders, whipping up anti-immigrant fervour for political ends also jeopardises legal migration. That hurts businesses’ ability to recruit skilled and unskilled workers alike.Government debt also looms large in CEOs’ minds. They praised Mr Trump’s Tax Cuts and Jobs Act, which reduced corporate tax rates from 35% to 21%. But they fear that neither Mr Trump nor Mr Biden has credible plans to stop the deficit from swelling. If Mr Trump pursues his most unorthodox economic ideas, there are fears that a loss of confidence could jolt the Treasury market, pushing up borrowing costs and sending the dollar into a tailspin.Some think that is going too far. “The world has insatiable demand for US Treasuries,” notes a pro-Biden Wall Street grandee. But a few corporate advisers raise the possibility that an unrestrained Mr Trump could trigger an American version of Britain’s bond-market sell-off in 2022, when investors lost faith in the economic stewardship of Liz Truss, a prime minister who was outlived by a lettuce. “I have parliament envy,” the leader of a lobby group chuckles. Unlike American leaders, he observes wryly, fiscally irresponsible British ones can be quickly forced out of office.America’s environmental trajectory under Mr Trump is another concern. The former president would, like the current one, be expected to double down on industrial policy. But unlike Mr Biden, whose signature effort has been the green-friendly Inflation Reduction Act (IRA), Mr Trump remains a climate sceptic who is likely to try to gut clean-energy programmes. In this case, he may face pushback from his own party. Many of the clean-energy projects predicated on funding from the IRA are in Republican-leaning states. Business, too, is likely to oppose a reversal of Mr Biden’s green agenda. Mr Bradley says that though industrial policy writ large remains “incredibly problematic”, government programmes that induce changes of behaviour are justified when technology is at an early stage, as with clean energy.If Mr Trump’s policy proposals directly related to business do not inspire confidence, his efforts to undermine faith in the judiciary, rule of law, NATO and other alliances, including with Ukraine, raise big questions about America’s role in the world. Some executives shrug this off. A few weeks ago the head of an international asset manager met a group of American bankers and found them “shockingly sanguine” about the election. They told him that whatever the outcome, the system would hold; that stockmarkets had done well under both presidents; and that the American economy was in such rude health that it could survive even electoral shenanigans. “Maybe their point is that business has transcended politics in America,” he says. He adds pensively: “Maybe they are right.”Or maybe they aren’t. Michael Strain of the American Enterprise Institute, a pro-business think-tank, says that Mr Trump’s populism makes political violence in America more likely this year. That would hurt business. The head of a global risk-advisory firm says uncertainty over Mr Trump’s geopolitical agenda will haunt multinationals, making it hard for them to decide, for example, whether or not to allocate resources to China or perhaps even Russia. Any sense that he is weakening the rule of law and the sanctity of contracts and treaties would ripple around the world. “Things like the rule of law are gossamer concepts that disappear just like that,” says a New York financier.His colleague, an expert on geopolitics, says that American businessmen rarely step back to consider how much the country’s global influence, including the hegemony of the dollar and the defence of maritime shipping routes, underpins their companies’ prosperity. Ron Temple, chief market strategist at Lazard, an investment bank, says the gap between right and left has widened in America, amplifying policy variability and becoming too important a factor for business to overlook. “There is almost a sense of complacency, married with entitlement, combined with presumptuousness,” he concludes. If anyone is likely to shake corporate America out of such numbness, it is Mr Trump. ■ More

ON JANUARY 13TH William Lai Ching-te was elected as Taiwan’s president. He thus secured a third term for his pro-independence Democratic Progressive Party (dpp). The vote will shape relations between self-governing Taiwan and China, which wants the island to be governed from Beijing. It will also affect the commercial relations between the two—and, because Taiwanese manufacturers sit at the heart of critical global supply chains, between them and the rest of the world.For Taiwan’s big businesses, the cross-strait tensions are unwelcome. Taiwanese entrepreneurs have been building factories on the mainland since the 1980s. These used to make textiles and other cheap goods. Today many make sophisticated electronics, including chips. Chinese data suggest that in 2022 Taiwanese firms had assets worth $43bn in the People’s Republic; by comparison the figure for companies from America, an economy 35 times the size of Taiwan’s, was $86bn. The real sum is almost certainly higher, as Taiwanese companies often channel investments via Hong Kong and other jurisdictions to avoid the scrutiny of their China-wary government.The Chinese Communist Party is likely to express its displeasure at the dpp victory by putting a squeeze on Taiwanese business. It has form. The corporate supporters of the first DPP president, Chen Shui-bian, who served from 2000 to 2008, faced regulatory scrutiny and investment restrictions from China, according to Taiwan’s Mainland Affairs Council, an agency dealing with cross-straits relations. In 2005 Shi Wen-Long, a petrochemical magnate and one of Mr Chen’s biggest backers, was forced into a humiliating public endorsement of China’s anti-secession law, which formalised military threats against the island.Since the dpp returned to power in 2016 under Tsai Ing-wen, Chinese commercial pressure has increased. Far Eastern Group, a Taiwanese conglomerate, was hit by a fine in 2021, which Chinese publications tied to the political views of its chairman, Douglas Hsu. Shortly afterwards Mr Hsu issued a statement rejecting Taiwanese independence. Even businessmen friendlier to China have not been spared. In October Chinese state media reported a tax investigation into Foxconn, a giant Taiwanese contract manufacturer with vast operations in China. Taiwan’s National Security Council claims that the tax probe was a targeted effort by China to prevent Foxconn’s founder, Terry Gou, from dividing the pro-unification camp by running for president. In January China slapped tariffs on a range of Taiwanese chemical exports, a move widely viewed as another warning shot ahead of the election.In the past such bullying led firms either to back the independence-wary Kuomintang (KMT), which favours closer economic links with the mainland, or to stay out of politics altogether (the approach of TSMC, the world’s biggest chipmaker and Taiwan’s most valuable firm). This time corporate grandees, even those with exposure to the mainland, appear less cowed. Some have gone so far as to affiliate themselves with the dpp. Early last year Tung Tzu-hsien, who chairs Pegatron, a big contract manufacturer, became vice-chairman of the New Frontier Foundation, a dpp-associated think-tank. In the run-up to the election Frank Huang, chairman of Powerchip Semiconductor Manufacturing Corporation, endorsed Mr Lai openly.Taiwanese businesses’ increased resistance to China’s strongarm tactics has several causes. American tariffs on Chinese-made goods have made export manufacturing on the mainland less attractive, notes Chun Yi-Lee of Nottingham University. Harsh policies such “zero-covid” pandemic lockdowns and arbitrary crackdowns on sectors such as consumer technology have further dented China’s appeal. The recent weakness of China’s economy is now compounding the sense that Taiwan’s economic future may not be so closely bound up with the mainland.image: The EconomistA shift is already visible in Taiwan’s trade and investment trends. The share of the island’s exports going to the mainland has dropped to 23% over the 12 months to November, down from an all-time high of 30% in 2021 and the lowest in almost two decades (see chart). In 2010, over 80% of Taiwan’s annual outbound investment flows went to mainland China. In 2023 just 11% did. Companies like Pegatron and Foxconn are investing in places like India and Vietnam, which offer both cheaper labour and a chance to avoid the American tariffs. According to one recent poll, more Taiwanese business owners care about Taiwan’s admission to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a trade deal between 12 countries including Australia and Japan, than the Economic Co-operation Framework Agreement, which a KMT government signed with China in 2010.China’s ability to inflict pain on Taiwanese business is diminishing for another reason. More than 60% of the island’s exports to the mainland and Hong Kong are electrical machinery and equipment, including computer chips. Cutting off such products could damage Chinese buyers more than it does Taiwanese sellers. ■ More

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It has been an inhospitable winter in Boston. Following the resignation of Claudine Gay as president of Harvard University on January 2nd, her interim replacement said he could not recall “a period of comparable tension” at the institution. Ms Gay was ousted after a plagiarism scandal erupted over her academic work. But her position had been precarious for months; some donors were upset that she seemed to tolerate students’ antisemitic outbursts. For conservatives, Ms Gay, who was Harvard’s first black and second female president, was also a symbol of liberal elites’ fixation on diversity, equity and inclusion (DEI).The ostensibly hard-headed sorts who attend Harvard’s management school, and that school’s ties to harder-headed corporate America, might be expected to insulate it from wider campus convulsions. Not quite. Businesses too are facing a DEI reckoning. As a consequence, Harvard Business School (HBS) is facing pressure on two fronts.Students at HBS are the holders of the winning tickets in the lottery of American capitalism. On average, they arrive with five years of work experience, nearly half of them from prestigious consulting or financial firms. Two years studying for the 115-year-old institution’s MBA degree all but guarantees a comfortable professional perch. Some do much better still. The fortunes of HBS alumni have helped build its reputation and, thanks to their generous donations, stock its coffers (combined with annual income from MBA tuition fees, executive education, a publishing business and online courses, in 2022 the school made $966m in revenue).After the murder of George Floyd, a black man, by a police officer in May 2020 HBS underwent a self-examination typical of other American institutions at the time. “What we could agree on is that the experience of black students at the school, as they reported upon graduation, was not quite the same as white students’. There was a deficit,” says Robert Kaplan, a faculty member involved in the review. HBS’s approach to DEI has since resembled that of corporate America—and of the rest of Harvard. In 2021 it hired a chief diversity-and-inclusion officer and tried to increase the diversity of the student body and faculty.Bringing DEI into the business-school classroom has been more controversial. Compared with the rest of the university, HBS faculty are probably less woke. The pressure for more DEI came mostly from students, recounts a professor. And if the aim of management education is even partly to simulate the challenges faced by grown-up executives, it is hard to imagine a curriculum ignoring such issues entirely. America’s demography is changing, and so are workers’ expectations about what their workplace ought to look like. The current backlash against DEI policies requires bosses to be far more thoughtful about how they approach them. It is requiring the same of business schools. Easier said than done.MBA students at HBS are taught using the “case method”. Classes ask students to put themselves in the shoes of bosses facing a specific problem. Since 2020 students have complained that those shoes do not fit. The result has been a significant increase in the ethnic and gender diversity of the case “protagonists”. But, as one faculty member notes, “the idea that you would be studying a chief financial officer doing a discounted-cashflow model, substitute a white man for a black woman, and then high-five all around is ridiculous.”HBS made a course called “inclusion” compulsory for first-year MBA students in the academic year of 2021-22. A version of it, which focused heavily on race and gender, had previously been optional; “We heard from the students that you’re teaching the course to the people that don’t need it,” says a faculty member with knowledge of the course. Many students and staff felt the new course lacked rigour and, partly because it was taught to a single group of 1,000 people, discouraged discussion.Echoing worries about free speech on other campuses, professors whisper that conservative and religious students feel less able to speak up more generally. The view is supported by the results of a student survey shown to faculty last year. Shortly after the attacks on Israel on October 7th and beginning of the war in Gaza, Bill Ackman’s comments about the war and Harvard’s campus politics caused some HBS students to lobby the school to disinvite the billionaire investor (and HBS graduate) from appearing on campus as a “protagonist” in a case about his hedge fund.As in boardrooms, HBS’s thinking on DEI is in flux. The inclusion course was first redesigned, to less damning reviews, then shelved. In June 2023 Francesca Gino, one of its architects, was put on unpaid administrative leave after accusations of fraud in her work (she has filed a lawsuit against Harvard University challenging her dismissal and alleging gender-based discrimination.) In the end, Mr Ackman did visit. Like America Inc, HBS is learning to walk the DEI tightrope—the hard way. ■ More

NERVOUS TRAVELLERS will break out in a cold sweat seeing pictures of a gaping hole in the fuselage of an Alaska Airlines Boeing 737 MAX 9, blown out at 15,000 feet (4,600 metres) after the plane had taken off over Oregon on January 5th. Nervous investors will have the same reaction to share prices of Boeing and Spirit AeroSystems, a firm spun off by the planemaker in 2005 which manufactured the fuselage and the failed part, a plug in the airframe where some larger MAX models have an emergency exit. The two companies’ market value plunged by 8% and 11%, respectively, following the incident.Miraculously, no one was seriously injured; had the aircraft rapidly depressurised at a higher altitude the outcome could have been worse. The precise cause of the malfunction remains unclear. The plane, delivered to Alaska Airlines on November 11th, was brand new. Similar unused emergency exits have been installed on a previous version of the 737 without problems.Regulators around the world have grounded the entire fleet of MAX 9s with the same door-plug, pending inspections to ensure their airworthiness. Early indications suggested a one-off manufacturing problem originating at Spirit, noted Bernstein, a broker. But on January 8th United Airlines said that preliminary examinations had identified other planes with “installation issues” connected with the door, such as “bolts that needed additional tightening”.image: The EconomistThankfully for Boeing, its airline customers and their passengers, fastening the loose bolt should not be too difficult. The MAX 9, a larger version of Boeing’s short-haul workhorse, makes up just over 15% of all 737 MAXes in service, and an even smaller share of unfilled orders (see chart 1). Only four out of five of the existing MAX 9 fleet, or 171 aircraft in all, have the unused exits. The bigger problem for Boeing is that the episode reinforces the impression that it has lost its way.The descent of America’s once high-flying aerospace champion began in October 2018, when a 737 MAX crashed in Indonesia. Five months later the same model crashed in Ethiopia. Both disasters were linked to problems with flight-control software and led to the grounding of the entire 737 MAX fleet for 20 months while the software was fixed. Boeing paid around $20bn in fines and compensation. Critics alleged that the company was paying too much attention to returning money to shareholders and not enough to engineering. A new chief executive brought in at the start of 2020 to salvage Boeing’s image, Dave Calhoun, promised to return Boeing to its roots of technical excellence.The door drama is only the latest sign that Mr Calhoun’s task remains incomplete. Deliveries of the company’s long-haul 787 Dreamliner have been suspended several times in the past few years in light of quality-control problems. In April 2023 Boeing said it would have to fix the vertical stabilisers on 737s in production at Spirit and in storage. Although it was not a safety risk, the defect put another dent in Boeing’s reputation. Another knock came in August, when the company said it would need to correct improperly drilled holes in part of the pressurised cabin of 165 737 MAXes assembled by Spirit. Ironing out manufacturing niggles is one reason that deliveries of Boeing’s 777X, another long-haul jet, will begin only in 2025, six years behind schedule.The 777x delay alone has set the company back at least $8bn in extra costs. The close call over Oregon will pile on more costs still, by forcing it to spruce up production processes. Boeing has not turned an annual profit since 2018. It lags behind its European arch-rival, Airbus, in orders for short-haul jets, by 4,800 to 7,300. It is struggling to rehire skilled workers laid off during the covid-19 lull as it tries to increase production of the 737 MAX from 38 a month to 50 by 2025-26, in order to meet strong demand from airlines dealing with a surge in post-pandemic revenge flying.image: The EconomistSome of Boeing’s woes on Mr Calhoun’s watch were beyond his control. Soon after he took over at the start of 2020 covid sent the industry into a tailspin. Both Boeing and Airbus lost roughly half of their market value between March and autumn of that year. But whereas Airbus shares now trade at an all-time high, Boeing’s are worth half what they were at their peak in early 2019 (see chart 2). If the American planemaker is to soar again, Mr Calhoun will need not just to respond to problems but prevent any more of them. ■ More