Sunday 16 December 2018

Davos delegates talk down Trump but bet big on US

Davos delegates watch the appearance of US President Donald Trump on screen from an adjacent room at the World Economic Forum. Photo: AP
Davos delegates watch the appearance of US President Donald Trump on screen from an adjacent room at the World Economic Forum. Photo: AP

Alessandra Galloni at Davos

Since Donald Trump won the US presidency, business has been booming for Monaco-based businessman Manfredi Lefebvre d'Ovidio.

His privately owned luxury cruise operator, Silversea Cruises, registered an immediate pick-up in bookings from its main US market and demand has continued to grow.

"Let's face it, we should be grateful to Trump," said Lefebvre d'Ovidio, a delegate to the World Economic Forum at the Swiss ski resort of Davos where Mr Trump spoke yesterday. "The economy is strong, and the American consumer is spending."

As the world's top policymakers and executives awaited Mr Trump to address the summit, they were privately voicing disbelief and disgruntlement at his foreign affairs, retreat on environmental issues and colourful tweeting.

African leaders felt insulted after he was said to have classified their countries as s***holes, a comment he denies making.

Latin American leaders were criticising his retreat from a Pacific-wide trade pact. And some top executives said they declined invitations to meet with him during the summit.

But with the US stock market soaring, Mr Trump's corporate tax cuts padding companies' pockets and US consumers spending again, companies here have been quietly applauding the US president even as many Davos delegates see him as an unwelcome outsider.

"On the values front, it's hard to see the international elite here in Davos applauding Trump, but on the wallet side of things, it may be different. That is the fundamental tension," said Helene Rey, economics professor at London Business School.

Some government leaders, economists and bankers are warning against an overheating of the US economy, an increase to the $20 trillion (€16 trillion) national debt and a "race to the bottom" on tax cuts.

All the same, firms have high hopes for the US market.

Kim Fausing, chief executive of Danish group Danfoss, which makes air conditioning and heating systems, said it was committed to the US market, where it has a dozen factories.

"This is a market that rules itself without too much intervention from the state, so it's a very attractive market for any company," Ms Fausing said.

Hussain Sajwani, chairman and founder of UAE property firm Damac, is a friend of Trump and his main business partner in the Gulf region.

He is looking more favourably at the United States after Congress passed Mr Trump's corporate and personal tax cuts.

"We were looking at property development in the States and the previous tax brackets were not very attractive and now they're more attractive," said Mr Sajwani, who owns Damac Hills, a major development that includes the Trump International Golf Club in Dubai.

Bob Dudley, chief executive of oil major BP, said he believed the United States was not the only good destination for oil companies. But he added that the tax cut "certainly makes the United States more competitive".

Mr Trump's $1.5 trillion tax plan unveiled in December slashed the corporate rate from 35pc to 21pc and temporarily reduced the tax burden for most individuals as well.

In its wake, several US companies have announced plans to increase investments, wages and bonuses.

This week, JP Morgan Chase unveiled a $20bn plan to hike wages, hire more people, open branches and expand its business - the most explicit response to the tax cuts of any major bank so far.

Two weeks ago, when Mr Trump said he would attend the Davos summit, the assumption was that he would be entering a lion's den of hostile global elites. And in the opening days, speakers criticised his administration for protectionist measures such as recent import tariffs on washing machines and solar panels - moves that Washington said would protect American jobs.

The "s***hole" controversy helped sour the mood.

"I'm from Africa, so the sentiment toward the US president is not too positive right now," said Jabu Moleketi, chairman of the Development Bank of Southern Africa.

French President Emmanuel Macron, in his keynote address, decried a "race to the bottom" that could emerge from countries lowering tax rates and trade wars, though he too plans to cut corporate tax rates over the next five years.

Beneath the criticism, though, a faint chorus of appreciation for some of Mr Trump's policies can be heard. At an early news conference on Monday, the International Monetary Fund cited US tax cuts as one of the reasons for its upgraded forecasts for global economic growth.

John Tuttle, head of global listings at the New York stock exchange, said interest from foreign issuers was rising.

"It's been a very good year for non-US listings. In fact I would say a significant percentage, north of 35pc of the proceeds raised last year by companies on the New York stock exchange, were from outside the United States," Mr Tuttle said. (Reuters)

Irish Independent

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