Thought leaders: Utah should do well under Trump (mostly)

Utah may fare well in several economic areas under a Donald Trump presidential administration, according to a panel of experts gathered last week in Salt Lake City. But one potential trouble spot exists: international trade.

Panelists said Utah is well-positioned in areas of energy, tax policy, fi nance and banking and healthcare, but Derek Miller, president and chief executive offi cer of the World Trade Center Utah, said the state’s strong export statistics could suffer. Utah currently exports $13.3 million goods annually and has a $4 billion annual surplus.

“Although I give us an ‘A’ today, I think that international business is probably one of the areas where we have the most to lose under a Trump administration,” Miller said at a Thought Leader Symposium focusing on how Utah’s economy might be affected by Trump. “By nature, I’m an optimistic person, but I’m afraid that I may be the most pessimistic this morning on this panel simply because Donald Trump directed most of his most-negative rhetoric toward trade.”

That rhetoric included getting the U.S. out of pending and existing trade agreements with other nations and instituting a 35 percent tariff on goods coming from companies that move jobs out of the U.S. “I’m fearful in Utah we could go from an ‘A’ to a ‘C’ or a ‘D,’” Miller said.

Miller later said the trade wars and tariffs of 35 percent have such potential for bad impacts “that it’s probably unlikely that we would get there or even go down that road.” Looking for positives in a Trump administration, Miller pointed out that Trump is an international businessman and dealmaker and that “cooler heads” in the administration or Congress “will put the brakes on a lot of these things that could be put into place that could lead to trade wars.”

He also noted that Trump “doesn’t seem to feel bound in any way by what he said yesterday of what he may do tomorrow. In this realm, that’s a positive.” Natalie Gochnour, Director of the Kem C. Gardner Policy Institute, gave Utah an “A” grade for its economy and a “B” for its tax system. “And I’m going to keep an open mind about what the Trump administration could mean to both,” she said.

“Uncertainty” was an oftenused word during the panel discussion. Gochnour used it first.

“There’s so much uncertainty here,” she said when asked about Trump’s tax policy. “We have a president-elect that didn’t speak in specifics, a president-elect who changes his mind, and much of what he’s proposed would need Congress to go along with it.” Trump is talking about tax cuts and spending that would be deficit-financed, she said, meaning an expansionary fiscal policy that would boost the economy in the short term. But it eventually could over-heat the economy, raise interest rates and increase the national debt.

“My forecast for where we’re headed has gotten better and better for the next year or two … but I fear years three and four,” she said.

Asked if that meant a recession could result, Gochnour replied, “Well, you get dangerously close if you don’t manage this right.”

More positive was Laura Nelson, Gov. Gary Herbert’s energy advisor and executive director of the Utah Office of Energy Development. “I think we have the potential to go from an ‘A’ to an ‘A-plus,’” Nelson said, describing Utah having a collaborative approach that brings about innovation that both advances the energy sector and addresses environmental concerns.

She predicts the new director of the Environmental Protection Agency, Scott Pruitt, will look to states to find solutions to energyrelated issues, including air quality and greenhouse gas emissions, and Utah is well-positioned in that regard.

“So, we’re moving in the right direction and I think we can continue in that direction and I think in fact we’ll be encouraged to provide that state leadership,” Nelson said.

Likewise, Utah has been innovative in the healthcare sector and likely will continue to be better than other states going forward, according to Rich McKeown, chief executive officer of Leavitt Partners. He gave Utah’s healthcare sector an “A” and “I don’t see that changing,” he said. Robert Spendlove, senior economist at Zions Bank, said Utah’s banking and financial sector earns an “A” while the nation’s gets a “C.” He’s hoping Trump eliminates the Dodd-Frank Wall Street Reform and Consumer Protection Act, which he said has resulted in the loss of 2,000 community banks, many of which were acquired by larger banks. The act has resulted in “severely constrained” access to capital, he said.

Spendlove attributed the rise in the equity markets and in longterm interest rates since Trump’s election to people’s expectation for future economic, GDP and inflation growth. “We’re seeing people — at least the business sector — seeing the proposition of lower regulations, lower taxes and higher infrastructure spending, and that expectation has increased the overall indicators on the equity markets,” he said.

As he did with international trade, Miller expressed concern about a Trump administration hurting Utah manufacturing. While some states have seen manufacturing troubles, Utah has had a “renaissance” as it has taken advantage of free markets and capitalism. Protectionism, he said, means “I can’t compete” in a free market or as it relates to fair trade. He suggested that Trump let the free markets work.

“My concern is, when Donald Trump talks about a ‘Put America First’ policy, certainly no one would disagree with that, but I don’t want to see a policy where ‘Put America First’ puts Utah last,” Miller said. “So my message for President-elect Trump would be, ‘No thanks. Utah doesn’t need your protection.’”

Panelists also said:
• Political appointees selected to lead federal agencies likely will clash with long-time staff members. Nelson predicted that that could mean certain federal energy and transportation regulations will be put on hold, although states will fill the void.

• Trump’s comments about the F-35 and Air Force One contracts have affected the stock prices of Boeing and Lockheed Martin. “I am stunned that we have a president-elect who is taking on American industry in the way that he is,” Gochnour said.

• Trump will not be able to repeat what he did in Indiana, where he negotiated the U.S. retention of about 1,000 Carrier jobs. Spendlove said he will be unable to negotiate with every company thinking about making changes.

“Also,” Spendlove added, “he’s now sent the message that if you want to shake down the government, just threaten to send some jobs overseas and you’re going to get a visit from possibly the president himself. It sets a really dangerous precedent about his willingness to directly intervene with the free market.”

The Thought Leader Symposium was hosted by the World Trade Center Utah and Zions Bank.