Trump Bodes Well for Farms and Coal Mines; Trade Deals in Perilby
Winners and losers described in new Trump administration
Need to accomodate Congress could limit scope of changes
Donald Trump has promised to reverse Obama administration clean air and water initiatives that coal miners and farmers criticize as job-destroyers. Trump also plans to kill the controversial Pacific trade pact and pursue a pugilistic trade relationship with China.
Whether the president-elect can actually carry out his plans to upset Washington’s ways isn’t clear. From the immigration crackdown Trump promises to his vow to block a media merger, he could find limited freedom to act.
“Trump would find himself hemmed in by the built-in limitations on presidential power. One of these is Congress,” said John Sides, an associate professor of public policy at The George Washington University in Washington, DC. “There are others -- including divided government, bureaucratic inertia, and public opinion. He would be no different than any other president in this respect.”
Trump may face friction with congressional Republicans because he hasn’t embraced longstanding conservative calls to cut entitlement programs such as Medicare and Social Security, said Molly Reynolds, a fellow in governance studies at the Brookings Institution in Washington.
“Is what Trump’s been saying on the campaign trail what he really believes? Would he bend to what congressional Republicans want?" Reynolds said. “That’s a big, open question that I don’t have an answer to."
At the same time, congressional Republicans and the new president could find agreement on tax cuts and some sort of Obamacare repeal, Reynolds said.
U.S. Chamber of Commerce President Thomas J. Donohue vowed to help Trump.
"The Chamber and its members stand ready help the new administration and the next Congress unite our country around a mission we believe all Americans can support—to grow our economy, create jobs, and lift incomes for all citizens," the organization, which calls itself the world’s biggest business federation, said in an e-mail.
For Bloomberg Intelligence on the Election, Click Here
Here’s a summary of some of Trump’s policy goals:
Criticism of trade deals was a cornerstone of Trump’s campaign, and he has threatened retaliatory tariffs against China, which he accuses of currency manipulation.
His positions are part of a trade agenda with the potential to rattle international partners and U.S. exporters alike as Trump institutes penalties for those he sees violating agreements, and proposes to upend existing agreements. Countries like China and Mexico are “eating our lunch” because trade deals have allowed them to take advantage of cheap labor at Americans’ expense, Trump has said.
Trump advisers have accused China of illegal export subsidies, intellectual property theft and lax worker safety and environmental standards that amount to an “undeclared trade war” on the U.S. Their suggested remedies include duties, scrapping trade deals and reneging on memberships in international organizations such as the World Trade Organization.
In the shorter term, Trump will aim to torpedo the Trans-Pacific Partnership trade pact with Pacific Rim nations, which faced an uncertain vote in Congress anyway, and try to renegotiate existing agreements including the North American Freed Trade Agreement, known as Nafta. It’s not clear whether a president could withdraw without approval from Congress, according to Bloomberg Intelligence analyst Caitlin Webber.
Trump has said he’ll make sure every trade agreement boosts U.S. economic growth, reduces the trade deficit and strengthens manufacturing.
Trump can take actions that “would be extremely destabilizing,” Simon Johnson, an economist at the Massachusetts Institute of Technology, said in a Nov. 2 interview on Bloomberg TV. Trump "promotes magical thinking and conspiracy theories over sober assessments of feasible economic policy options" and ignores “the benefits of international trade,” 370 economists including some Nobel Prize winners said in a letter released Nov. 1.
The failure of the Trans-Pacific pact would mean that Nike Inc. and Adidas AG forgo additional savings on sourcing, while import barriers remain that could protect automakers such as Ford Motor Co. and General Motors Co., according to Webber, the Bloomberg Intelligence analyst.
Trump says he’ll reverse course on much of President Barack Obama’s energy and environmental agenda by rescinding "job-killing" regulations. Rules on the chopping block include those aiming to reduce water pollution and forcing states to slash greenhouse gas emissions from electricity.
Although Trump has limited power to wipe the slate clean, his presidency nonetheless is good news for the oil, gas and coal interests he has championed on the campaign trail over renewable power from wind and the sun.
Robert E. Murray, the chairman of closely held Ohio-based miner Murray Energy Corp., called it "a great day for coal miners and their families and for all Americans who depend on reliable, low-cost electricity, which coal provides."
Bonds for coal producers surged on the election results. Murray’s $1.1 billion of 11.25 percent bonds climbed to their highest level since July 2015, according to data compiled by Bloomberg. Peabody Energy Corp.’s $1.5 billion of 6 percent notes, which are in default, were up about 9 percent to 55 cents, their highest since June last year.
It’s unclear exactly how Trump would make good on his promise to bring back coal mining jobs, which have dwindled amid cheaper natural gas and pollution restrictions in the electric market. He could lift a moratorium on selling new rights to mine coal on public land that Obama’s Interior Department imposed in January.
"There’s no legal or regulatory driver that forced the Obama administration to tackle coal-leasing practices in the first place," said Bloomberg Intelligence analyst Rob Barnett. "Trump should be able to lift the leasing pause via executive order right away."
Trump also could stop or derail the underlying environmental review, still at least two years from completion, a move that could benefit Peabody, Arch Coal Inc. and other mining companies. Peabody Energy said in a statement Wednesday that the new administration can accelerate clean-coal technologies that promise to pare greenhouse gases and traditional air pollution tied to burning the fossil fuel.
Under Trump, the Environmental Protection Agency and the Interior Department will probably use a lighter hand to enforce Obama-era rules regulating drilling on public land and limiting methane emissions from oil and gas sites, benefiting Anadarko Petroleum Corp., Continental Resources Inc., Occidental Petroleum Corp. and other energy companies. Trump already signaled the approach by vowing to "refocus" the EPA on what he called its core mission "of ensuring clean air and clean, safe drinking water for all Americans."
The Denver-based Western Energy Alliance, which represents oil and gas producers with leases on federal lands, said in a statement it was "overjoyed" that Obama’s presidency is coming to an end. "We look forward to working with President-elect Trump’s administration to roll back many unlawful regulatory orders and to a federal government that is not beholden to the environmental lobby while ignoring the working class," the alliance said.
By selectively enforcing some regulations and spiking others, Trump can slow the turn of U.S. energy policy to favor renewable sources, said Kevin Book, managing director of the Washington-based research firm ClearView Energy Partners LLC.
Trump could have an opening to overhaul Obama’s signature climate change initiative, the Clean Power Plan that limits greenhouse gas emissions, in a way that benefits coal, because of an ongoing court challenge from industry groups and 27 states. If the D.C. Circuit Court of Appeals rejects the rule outright, the Trump administration could decline to appeal. And if federal courts kick the measure back to the EPA for more work, the agency could slow-walk a revision or pursue an entirely different approach.
Where Obama has advocated renewable wind and solar power, Trump is set to put the brakes on. Although Trump said he was "all for alternative forms of energy" during a presidential debate last month, he previously questioned the economics of solar power and has criticized wind power for killing birds caught in turbines.
Newly renewed tax incentives driving the installation of wind and solar power projects are unlikely to be rolled back under Trump, but he probably would not encourage another extension. Solar developers could get less leeway to claim an investment-tax credit, ClearView Energy Partners said in a research note to clients.
Trump promises a hostile reception for media mergers, and he has expressed opposition to net-neutrality rules that bar internet service providers from interfering with web traffic.
“He’s been pretty clear that his personal preferences would drive policy," said Reed Hundt, a former Democratic chairman of the Federal Communications Commission.
Trump was quick to react to AT&T Inc.’s proposal to buy HBO and CNN owner Time Warner Inc., using an Oct. 22 campaign appearance to call it “an example of the power structure I’m fighting.” A Trump administration won’t approve the deal “because it’s too much concentration of power in the hands of too few,” Trump said.
"The deal is now more likely than not to be blocked," Jonathan Chaplin, an analyst with New Street Research, said in a note Wednesday. "After all, it is rare for a presidential candidate to comment on such things during a campaign but when that happens, the team he assembles generally take such statements as commands."
Trump also said he’d “look at” breaking up cable provider Comcast Corp.’s combination with NBCUniversal, a deal that won approval in 2011. The tie-up “concentrates far too much power in one massive entity that is trying to tell the voters what to think and what to do,” Trump said. Trump appears to have been displeased with NBC coverage of his campaign, taunting an NBC News reporter at a Miami rally last week.
The FCC, over Republican objections, last year passed the net neutrality, or open internet, rule that requires cable and telephone companies such as AT&T and Comcast to treat internet traffic equally. In November 2014 as the FCC prepared the rules, Trump in a Tweet said, “Obama’s attack on the internet is another top-down power grab.” The statement indicates Trump may look favorably on efforts to weaken or repeal the rule.
Trump will appoint the next FCC chairman, and his win “likely leads to dismantling of broadband regulation" including the net-neutrality rule, Matthew Schettenhelm, a Bloomberg Intelligence analyst, said in a note Wednesday.
Trump -- in an apparent break with fiscally conservative congressional Republicans -- has said he wants to spend at least twice the $275 billion on infrastructure that Hillary Clinton proposed.
While Trump’s website doesn’t provide an estimate on how much he’d spend on infrastructure repairs, in August he told Fox Business Network it would be "at least double her numbers, and you’re going to really need more than that."
Trump has panned the state of U.S. infrastructure. “We have roads that are collapsing, we have highways and bridges and tunnels that are in a horrible state of repair,” Trump said at a campaign event in September. “We have hospitals and schools that are disastrous. And our airports are Third World.”
Trump’s campaign website doesn’t say how he would pay for rebuilding the facilities. In the August interview, he said he’d create a fund with "a phenomenal deal with the low interest rates."
The funding would be used to update roads, bridges, tunnels, airports, railroads, ports, waterways and pipelines, according to the campaign. The push could help companies such as equipment makers Caterpillar Inc. and Deere & Co., rental provider United Rentals Inc., and providers of crushed stone, sand and gravel such as Vulcan Materials Co., according to Bloomberg Intelligence analyst Karen Ubelhart.
That is in addition to the wall he has pledged to build along the U.S.-Mexican border, which would also generate jobs for construction workers and demand for earth-moving equipment.
Without providing specifics, Trump also vowed to "reform" the Federal Aviation Administration and the Transportation Security Administration. The House supports taking the FAA’s air-traffic division and putting it under control of a government-sanctioned nonprofit corporation, and the issue will likely come up next year when lawmakers draft legislation setting FAA policy.
In an apparent reference to growing uses of technologies for autonomous driving in motor vehicles and other modes of transportation, Trump’s website said he wants to support innovations in "the next generation of vehicles."
Trump’s statements on agriculture and food policy are few, and two of his signature positions -- skepticism toward trade agreements and opposition to increased immigration -- run counter to positions taken by traditional Republican-leaning farm-lobbying groups such as the American Farm Bureau Federation in Washington.
Still, Trump cultivated farmers during his campaign, supporting ethanol subsidies favored by corn farmers during his Iowa caucus campaign and appointing a 64-member agricultural advisory committee in August. With rural voters a key component of his victory, Trump is likely to look favorably upon those who helped him win, said Gary Blumenthal, chief executive officer of World Perspectives, a Washington D.C.-based consulting firm.
“The farm groups don’t agree with everything he says, but he has that get-government-out-of-people’s-lives appeal that they support,” Blumenthal said.
That attitude may inform Trump’s approach to regulation, Blumenthal said. Trump has pledged to repeal the Obama administration’s Clean Water Rule, which farmer groups attack as improperly regulating pollution in small streams and waterways, and his hostility to regulations could spare farmers new rules, he said.
Trump’s administration may not play heavily in the biggest agriculture legislation expected in the next four years, a farm-and-food stamps bill due in 2018 that could emerge as a status-quo measure, said Robert Paarlberg, an adjunct professor at Harvard University’s Kennedy School of Government.
Spending pressures could keep programs from expanding, and Tea Party budget-cutters will have less influence than with a more traditional Republican president, he said. “Farm groups are pretty comfortable with the arsenal of programs that are in place,” Paarlberg said.