Donald Trump again? This thought also scares managers and entrepreneurs. However, USA expert Jan Kallmorgen advises: We should urgently prepare for it – Trump is doing it too.
Mr. Kallmorgen, we need a president Trump set?
Anything else would be negligent, as much as I hate to say it. His chances of winning the Republican nomination are very good. And the election in November could also turn out differently this time than almost four years ago.
But how do you prepare for a man like Trump, who is so unpredictable?
Basically, you have to consider three levels: The first level is domestic and socio-political. The country is torn apart and polarization will continue to deepen, I fear. At first glance, this doesn’t seem that relevant for companies, but politically and for the cohesion of the USA it is extremely important. And companies do not operate in a political vacuum.
You mean, if, like last time, the bosses try to get close to the new president again, while half of the country may still be protesting in the streets?
I still remember the pictures of the CEOs gathering around the new president in the White House or in Davos after he took office. On the one hand, you want to represent the interests of your company, but on the other hand, such images also pose a reputational risk for companies, as we have seen from the negative headlines at the last meetings and which is better to think about beforehand. In addition, the tone towards the European economy would certainly become harsher again under Trump, and managers have to be prepared for that too.
You think you should make allies in the camp early on republican seek?
Yes, sure, that’s just professional. The big corporations with their representative offices in Washington are certainly already doing this. In any case, this is the second level, economic policy and regulation will become more unpredictable under Trump – especially when it comes to tariffs and trade. On the other hand, not everything has to get worse under Trump: under him, energy prices in the USA will certainly tend to become even more attractive than they already are today. If there is any doubt, the USA’s technological lead will probably become even greater. And the capital market will also remain deep and attractive or perhaps become even more attractive.
Jan Friedrich Kallmorgen is a partner in strategy and transaction consulting at EY with a focus on geopolitics. He recently published the book “The Geopolitical Risk. Companies in the New World Order” (Campus Verlag)
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You talked about three levels that companies need to keep an eye on.
The third level is geopolitics. The relationship with China is unlikely to get any better; it is feared that we are heading towards a new Cold War – this time with China. In the technology sector, the much-cited decoupling is already a reality and the USA expects Europe to stand by their side against China. Beijing will react to this by saying that the Chinese market will become more difficult for European companies for geopolitical reasons. In addition, the Chinese economy is growing weaker than previously assumed and export growth will have to come from somewhere else in the future, for example from other areas of Asia. There are many expectations attached to India, but especially from the USA – which in turn speaks for itself as a board member or The Supervisory Board now has to deal with investments in the USA even more than it already does.
Have these questions and challenges reached the boardroom?
Scenario planning for a second Trump presidency will begin now at the latest. Every board member, CEO or entrepreneur with international business must grapple with what is on the White House agenda from 2025 and what a possible Cabinet looks like. Especially since the Trump team is proceeding very systematically this time and intensive preparations are underway for a possible change of power.
You have already mentioned trade policy and possible punitive tariffs. What exactly does Europe have to prepare for?
The familiar pattern from his first term in office is likely to continue: anything that is competition from abroad will have a harder time under Trump – we’ve already seen this with cars from Europe. Conversely, he will do everything he can to attract investments to the USA. This will also be very interesting for European companies. And it is particularly worthwhile to look at the individual states, which in many cases compete to see who can provide the most attractive location conditions.
What do you mean?
It is foreseeable that individual states will set their own priorities and pursue policy approaches even more. If Trump withdraws from the Paris climate agreement again, states such as California or New York could join or associate with the agreement, because both place great value on climate protection and could also set up their own funding programs independently of Washington.
But Europeans probably have to worry most about foreign and security policy.
And rightly so – the turbulence will be a walk in the park for companies. Trump will put massive pressure on the Europeans to assume more costs for their own defense. Even if he doesn’t leave NATO – which is a very real danger – we Europeans will have to massively expand our defense capabilities and budgets. Because Trump is unlikely to be willing to pay for the American protective shield in the future. Then we are no longer talking about 2 percent of GDP for defense spending, but possibly 5 to 6 percent. That will then trigger intensive discussions, which we have to have.
However, this would pose immense problems for German budget and financial policy.
It is likely that part of the necessary additional European defense spending would be covered by the EU, for example through a new fund financed by total debt, the funds of which would be used for armament or support for Ukraine. It remains to be seen whether this is compatible with the German debt brake.
Let’s take stock of Bidenomics: Has this program already failed?
No, the program has not failed – on the contrary, many would like it to be in Europe and the positive figures on the labor market and investments in the USA show that Biden’s programs are working. But that doesn’t resonate with many Trump voters. On the one hand, because there is a reflex of ‘why is the state intervening again’, and on the other hand, because inflation has hit people with low and middle incomes, sometimes brutally. In some places, food has become 20 to 30 percent more expensive – and wages are often stagnating.
Please fast forward ten months: How will a possible duel between Biden and Trump turn out this time?
Given the dissatisfaction with Biden in the polls and the massive support for Trump among his core voters on the other side, it is entirely conceivable that Trump wins in November. Unless a court stops him, but I wouldn’t count on that. In addition, the motivation in the Biden campaign team is only mediocre and there is great dissatisfaction that the Democrats have failed to develop a younger candidate. So, I would prepare for a President Trump and plan for this eventuality.