On Thursday, Donald Trump will travel to Davos, Switzerland for the World Economic Summit where the White House says the president will play the role of salesman-in-chief at the annual gathering of world leaders and the titans of international business and investment.
For Donald Trump, who campaigned on an "America first" platform, criticizing multilateral trade agreements and tapping into voters' frustrations that the globalized economy had decimated the American workforce, Davos would seem the least likely place to find the 45th president.
Ahead of the visit, world political and business leaders to fully get a handle on Trump. In one respect, they see a businessman, a pragmatist whose chief achievement of 2017, a massive overhaul of the U.S. tax code, is providing new incentives for international investors to make money in the United States. In other ways, many are unnerved by the president's rhetoric, especially on the issue of global trade, and wonder if it is merely talk, or if Trump will change the course of the world's largest economy.
Director of the White House Economic Council, Gary Cohn, previewed Trump's visit to Davos earlier this week. Trump's message to the gathering will be "America is open for business," Cohn said. During the trip, Trump will be focused on encouraging foreign investment in the U.S. economy, while stressing "fair and reciprocal" trade between countries.
"America first is not America alone," Cohn told reporters on Tuesday. "When we grow, the world grows; when the world grows, we grow. We’re part of it, and we’re part of a world economy. And the President believes that."
THE GOOD NEWS
Despite being buried under more than six feet of snow, a number of Davos attendees prepared a warm welcome for the U.S. president. During a Tuesday opening panel on global markets, some of the world's top financiers praised the Trump tax cuts as a gift to international investors and a potential boon to U.S. economic growth.
"There are going to be a lot of flows into the United States," said Stephen Schwarzman, co-founder of Blackstone Group, one of the world's largest private equity firms. "There are companies all around the world who are looking at the U.S. now and saying, 'This is the place to be in the developed world.'"
The CEO of Credit Suisse, Tidjane Thiam said that "tax reform in the U.S. has been exactly what we needed," explaining that the changes "give a new impetus to world growth." He underscored that in a lot of public discussions, "the positive impacts of that [tax reform] are underestimated."
So far, the overall impact of the Trump-GOP tax reform has been positive for companies, Adena Friedman, president and CEO of NASDAQ Inc. told the audience at Davos. "It is definitely a growth driver," she said, "a way to drive more natural behavior of the global economy with the U.S. being highly competitive and... very, very attractive as a destination for business."
For investors, the advantages of opening a plant or promoting business in the United States means close proximity to an educated workforce and easy access to the largest consumer market on the planet. For Americans, that kind of investment could translate into new plants, new jobs and overall increased economic growth.
The International Monetary Fund revised upward their outlook for world economic growth by 0.2 percent in 2018 and 2019 in response to the U.S. tax reform. The IMF anticipates benefits on world economic growth will continue through 2021, but drop off after the temporary tax cuts expire.
Among U.S. competitors, the new plan prompted some countries to announce new incentives to stay competitive with the U.S. Shortly after the tax bill passed, China announced that foreign companies would not have to pay taxes on their earnings in an effort to keep U.S. companies from taking their profits out of the country.
In Australia, the head of the Treasury called for $65 billion in tax cuts in order to offset the anticipated losses due to the newly accommodating corporate tax environment in the United States.
"Around the world, people are looking at this and saying, 'What are we gonna do about it?' They're trying to play catch-up with the United States and our America first economy," Sen. John Barrasso, R-Wyo., told reporters on Tuesday.
THE BAD NEWS
In light of the optimism over a less regulated, lower-tax climate in the United States, experts are still holding their breath, noting it's still too soon to know whether the tax bill will pan out the way the White House and some global investors have hoped.
"There's no doubt that a lot of these investors and corporate CEOs will look at the taxes and say, 'We like 21 percent more than we like 35 percent,' but there's a lot more than the headline figure," warned Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics. "Overall, lower taxes should help attract firms, but there is more to the story than that."
When Trump gives his speech at Davos on Friday, world leaders and investors will be listening carefully to the president's position on global trade, an issue that has been a source of significant tension since the 2016 campaign.
"The whole America first-type rhetoric is the antithesis of what many of the people at Davos believe in," Kirkegaard explained. "If he comes out with a speech that is anything like the rhetoric in his campaign, they will go into the other room and shake their heads."
Since taking office, Trump's actions and statements on global trade have been a source of uneasiness. It started when he pulled the U.S. out of the 11-nation Trans-Pacific Partnership trade deal within days of taking office. With the United States conspicuously absent from the TPP talks, Canadian Prime Minister Justin Trudeau has stepped into the spotlight as the chief broker of a deal that promises to open up trillions of dollars in trade.
Trump's May 2017 announcement that the United States would reopen negotiations on the North American Free Trade agreement have also become a source of concern in recent days. On the eve of the sixth and latest round of NAFTA renegotiation talks, Reuters reported that Canadian officials are "increasingly convinced" the United States will officially announce its intent to pull out of NAFTA. The move hurt the Canadian and Mexican currencies and reignited fears that the president could make good on a campaign pledge to levy border tariffs on goods from Mexico and Canada.
TENSIONS OVER TARIFFS
On the eve of the World Economic Forum on Monday, Trump announced tariffs on large appliances and solar cells, intended to target South Korea and China. The timing of the announcement, Kirkegaard noted, "is unfortunate," especially as if it is interpreted on the world stage as the new direction of U.S. trade policy.
"If this is going to be his agenda, then absolutely he will not achieve a goal of increasing foreign investment in the United States or shift production here. Quite the contrary, in fact," Kirkegaard stated.
Gary Cohen, clinical professor of global trade at the University of Maryland's Robert H. Smith School of Business, warned that the U.S. trade policy is going "backward" under Donald Trump.
"In Asia, we walked away from TPP... and by pulling out of that, these Asian countries are now forging a partnership and a trade agreement without us. I think that's going to hurt," Cohen warned. "And we still don't know what the impact will be on NAFTA, that's still up in the air."
The latest round of tariffs on South Korean and Chinese goods are particularly worrying, Cohen said, not only because of the impact on U.S. consumers but because they are "creating a lot of suspicions" among other world leaders watching the president's actions ahead of the World Economic Forum.
"I question how well Trump will be received, especially after these past few days with these global trade moves and protectionist measures," Cohen noted. "I think he will meet resistance at Davos."
Following Trump's Monday announcement of tariffs on solar cells and washing machines, Chinese officials reacted with strong dissatisfaction, calling the action "an abuse of trade remedy measures."
In Europe, the CEO of SolarPower Europe denounced the action, claiming the trade barriers will impact the entire solar supply chain.
The president of the Alliance for American Manufacturing, Scott Paul cautioned against drawing broad conclusions about Trump's latest tariff, noting it reflects a specific incident and specific complaints from U.S. companies, not a fundamental change in U.S. trade policy.
When the president speaks at Davos on Friday, Paul expects to hear a "two-pronged message," first making clear that "America is open for business," but also laying out the expectation that U.S. trade with foreign partners will be reciprocal and fair.
"That may be shocking to some of our trade partners, our allies and competitors," Paul noted.
"The truth of the matter is for so long the world has relied on America kind of being a chump in the trade arena. My hope is that's coming to an end," Paul said. "It certainly doesn't mean we're preparing for a trade war, it means we're going to assert rights we've had all along."
He expects that stance will cause some "chafing" among world economic leaders, "but many of these leaders need to look in the mirror and say, 'We bear some responsibility for this.'"