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6 steps for IR under the new Trump trade paradigm

President Trump’s campaign promise to recast America’s international trade relations in an aggressively protectionist mold has prompted many public companies to add new risk factors to their regulatory filings—and probably some new talking points for discussions with analysts and investors.

The president wasted no time in withdrawing the U.S. from the Trans-Pacific Partnership (TPP), scheduling meetings to begin renegotiating the North American Free Trade Agreement (NAFTA), and slamming Mexico, China, Japan and Germany for their trade and currency practices.

Although major business and agricultural groups had lobbied to salvage the TPP and warned about the dangers of withdrawing from NAFTA, Trump brushed aside these concerns along with 200 years of economic orthodoxy.   

In a series of meetings, he pressed CEOs to invest in America and warned that they would face a “very major” border tax if they moved operations offshore with the intention of shipping goods back to the U.S.

There was no pushback. The few CEOs who spoke with the media expressed confidence in the president and said they could work with him.

They understand the reality. As University of Michigan professor of economics and public policy Justin Wolfers wrote, “International trade policy is one area where [President Trump can] unilaterally deliver on the changes he has promised [and] there is very little Congress can do to stop him.”

For global companies large and small, the new paradigm presents a host of challenges, uncertainties and, for some, opportunities.

Although it would be premature to factor any of the proposals into 2017 guidance, it is not too soon to have a good sense of how they may affect you. Here are six recommendations:

  1. Assess the possible impact of broad potential events such as the collapse of NAFTA and the imposition of punitive tariffs or an import-based tax. Your analysts and investors are working on their own assessments—stay ahead of them.
  2. Assess the possible impact of industry-specific policy changes. For example, will reducing the regulatory burden on the energy industry result in higher or lower oil and gas prices?
  3. Assess your vulnerability to a Trump Twitter attack—or to an activist alleging you are vulnerable to a Trump attack.
  4. Consider delaying, canceling or reworking any plans to shift U.S. production offshore or make new investments overseas—or prepare for the consequences.
  5. Be cautious about touting new U.S. investments or pledges to hire U.S. workers, lest it get you caught up in controversy.
  6. If you have views, pro or con, on some of the proposed trade policies, make sure you let the appropriate U.S. senators and congresspersons know.

Finally, don’t be lulled into thinking some of these things could never happen.

Want to know more about how the new Trump Administration is likely to impact investor relations, public companies, the capital markets and more? Click below to read other articles in our special Dix & Eaton blog series or ask us a Trump transition question here.

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