WASHINGTON – Minnesota businesses whose growth plans depend on exports will face a new obstacle if President-elect Trump enacts the protectionist trade program he outlined during the campaign.
While global companies such as Cargill and Medtronic see developing economies around the world as investment opportunities, Trump has focused on protecting American jobs.
He promised to kill current and past free trade agreements, slap tariffs on imports and penalize American businesses that relocate production plants outside the United States.
The agenda Trump promoted as he stumped for election represents “one of the most isolationist stances in modern history,” said Steve Parente, who directs the University of Minnesota’s Medical Industry Leadership Institute.
Throughout the state, businesses of all types have plenty to lose or gain depending on how closely Trump’s policies match his rhetoric. The president-elect promised during the campaign to repeal the Affordable Care Act and to dismantle financial industry regulations that emerged after the last recession.
Some companies, like Cargill, have gotten out in front, hammering home messages of compromise to the new president.
“International trade plays an integral role in global food security by enabling food to move from areas of surplus to areas of need,” Cargill CEO David MacLennan said in a statement to the Star Tribune. “We need intelligent trade policy in order to feed a growing population in a safe, responsible and sustainable way.”
Other sectors have been more reticent. AdvaMed, the nation’s largest medical device trade group, said it had no one who could speak about the potential impact of Trump policies on the state’s med-tech sector.
Trump’s trade ideas have divided some of the state’s agricultural interests.
Minnesota Farmers Union President Doug Peterson doesn’t like trade deals such as the 20-year-old North American Free Trade Agreement (NAFTA) and the pending 12-country Trans-Pacific Partnership (TPP). He said such deals only favor big agriculture and cost small U.S. farmers sales by pitting them against low-wage workers in foreign countries.
C. Ford Runge, director of the U’s Center for International Food and Agricultural Policy, sees it differently.
“If the U.S. engages in overt protectionism, and if the consequence of that protectionism leads to retaliation, which it surely will, one of the biggest losers is going to be agriculture,” Runge said. “Minnesota agriculture is profoundly dependent on export markets. The irony in this is that rural areas of Minnesota which disproportionately voted in favor of Trump have the most to lose.”
Parente says continued foreign expansion of U.S. medical technology figures prominently in many companies’ plans.
“China is a critical piece,” Parente said. “Medtronic has an innovation center in Shanghai. Boston Scientific has a facility there, too. Med Tech has been a priority in China’s last two five-year plans. That matters to us in Minnesota. If trade can be normalized, the [state’s] economy will benefit.”
In agriculture and medical technology, especially, the best prospects for growth rest beyond U.S. borders.
Growing middle classes in India and Russia have more money and higher expectations for health care, making them enormous emerging markets for Minnesota device makers. The same is true for agriculture.
“Minnesota grows more food than we can use,” said Kevin Paap, president of the Minnesota Farm Bureau. “One of every three acres is grown for foreign markets.”
Recent bumper crops drove down domestic commodity prices while driving up the need for increased foreign demand, said Paap, who grows corn and soybeans in Blue Earth County. He knows jobs and trade helped determine the presidential election. “But I lived through one embargo,” he said. “I never want to do that again.”
Some of what Trump has proposed would be good news for the financial services sector, including Minnesota-based companies such as U.S. Bank, TCF Bank and Ameriprise Financial.
“In general, the Trump administration may be looking to ease back on some of the rules and regulations” put in place after loose, sometimes improper lending and speculation policies led to the Great Recession in 2007, said Russell Price, a senior economist at Ameriprise Financial.
“Something big [that] most businesses are hoping for,” Price added, is a tax holiday on trillions of dollars of foreign profits — including tens of billions held by Minnesota companies. In general, these profits cannot be spent in the United States without paying a tax equal to the difference between the foreign tax rate in the countries where the profits were booked and the U.S. 35 percent corporate rate.
Trump favors letting those profits be brought back to the United States at a single tax rate much lower than most companies would currently pay.
While decried by some as tax avoidance, such a move could provide revenue to fund roads, water systems, schools and other infrastructure projects Trump wants to build to create American jobs.
Less certain are Trump’s plans for the nation’s health care system. Candidate Trump pledged to repeal the Affordable Care Act, President Obama’s reform legislation that expanded Medicaid, required coverage to meet certain standards, and ended the practice of denying coverage for prior-existing health conditions.
Parente predicted that Trump’s impact on Minnesota-based UnitedHealth Group, the nation’s largest insurer, which sells policies outside the state, and nonprofit companies like Minnesota Blue Cross-Blue Shield, which insure state residents, would be neutral or possibly advantageous.
But like so many of the economic issues surrounding the president-elect, much depends on his ability to massage campaign messages into workable policies. Trump’s call to kill the Affordable Care Act has never been accompanied by a detailed discussion of what will take its place.
Covering prior-existing conditions can add up to 10 percent to premium costs, Parente said. Individual health insurance exchanges did not attract enough young, healthy premium-paying participants to offset the expenses incurred for older, sicker participants. Ending both might be a financial boon, but it comes with a human cost.
“Nationally, Trump’s plan comes pretty close to repeal with not much to replace it,” Parente said. “If that happens, we’re talking about 20 million people losing insurance coverage in a year.”