Tech Crunch
Donald Trump constructed his successful presidential campaign around a promise to build a wall along Mexico’s border with the U.S., claiming the project would cost a mere $4 billion, which Mexico would pay. Some experts — many of whom remain skeptical about Mexico’s willingness to foot the bill — estimate it would cost $25 billion, not including maintenance fees.
The economic cost of such an undertaking pales in comparison to that of the symbolic wall Trump plans to place between the U.S. and the rest of the world.
In fact, American businesses and foreign workers will likely face the harshest financial consequences, not as a direct result of the erection of a wall but because of the enactment of accompanying trade and immigration policies. The technology industry is particularly likely to suffer from a Trump presidency.
IBM, for instance, has transferred much of its manufacturing out of the country in recent years. In 2013, the tech firm opened a factory in Guadalajara, Mexico, where it began manufacturing its PureFlex Systems and Power Systems servers, among others. Trump’s protectionist policies —specifically his plans to unwind the North American Free Trade Agreement — would force IBM to move manufacturing back to Rochester, NY, or else face steep tax penalties.
A document drafted this week by Trump’s transition team affirmed the stance he has taken toward international trade over the past year, stating that his administration “will reverse decades of conciliatory trade policy.” The memo details a plan to pull out of or amend NAFTA within 200 days of Trump taking office, a move that could easily spark a trade war and inflict immense damage on the American tech industry.
Renegotiating NAFTA, a task that would test Trump’s self-proclaimed superhuman deal-making abilities, could prove impossible. Mexican Economy Minister Ildefonso Guajardo has already declared — in no uncertain terms — that his country is not open to reopening negotiations, expressing that he would be willing to “talk so we can explain the strategic importance of NAFTA for the region.”
“Here we're not talking about...renegotiating it,” he added. “We're simply talking about dialogue.”
If talks do fall through, a withdrawal process from the 22-year- old trade deal is accounted for in its Article 2205, which allows any of the three involved countries to withdraw “six months after it provides written notice of withdrawal to the other Parties.” Trump does not plan to stop there: he has threatened to place tariffs as high as 35% on Mexican goods. Within a year of Trump taking office, American tech companies could face a new series of hurdles to engaging in transnational business.
Mexico is not the only country that Trump plans to take an aggressive trade policy towards. The president-elect has signaled that at the very start of his incumbency he will label China as a currency manipulator. Moreover, the whopping 45% tariff he has threatened to place on Chinese would likely cause Beijing to dump American assets or place its own tariff on American exports.
Companies such as Apple and Hewlett-Packard have vested interests in keeping trade barriers between the world’s two biggest economies low. Both companies manufacture in China and rely heavily on imports from here as part of their global supply chains. HP Inc., the leading foreign manufacturer of personal computers in China, is particularly concerned with the possibility of trade excises.
HP Inc. Chairwoman and HPE CEO Meg Whitman has publicly expressed the company’s opposition to Trump’s policies. “I think his policies around free trade will be damaging to businesses as a whole,” said Whitman in a CNBC interview in May. Whitman has publicly expressed the concern that if import taxes are enacted, HP will be less competitive in comparison to Chinese companies such as Lenovo and Huawei.
Another fear of tech enterprises is that Trump will follow through on the anti-immigrant rhetoric that characterized his bid for the presidency. One way he is likely to do this is by making it more difficult for highly skilled workers with backgrounds in tech to obtain immigration visas, much to the disapproval of the tech sector. And, with the help of Senator Jeff Sessions, he has already laid out a proposal that would make it costlier to hire immigrants through the H-1B visa program.
In an October rally in Ohio, Trump declared that he would protect American jobs, saying: “companies are importing low-wage workers on H-1B visas to take jobs from young college-trained Americans. We will protect these jobs for all Americans, believe me.”
Yet, Trump has delineated certain policies likely to benefit the tech industry, such as his stance on tax repatriation, an issue which most tech companies lobby heavily for in Washington. “Honestly, I believe the legislature and the administration will agree that it's in the best interest of the country and the economy to have tax reform,” said Apple CEO Tim Cook in an interview with the Washington Post.
Cook has said that Apple’s income held overseas is unlikely to come back to the country unless it is taxed at a “fair rate.” Trump has proposed lowering the rate from 35% to 10%, a decrease that could meet Cook’s demands, as well as those of other tech CEOs. When he’s not calling for his supporters to “boycott Apple,” as he did at a rally in February over an encryption controversy, Trump could prove an auspicious president for the company.
Given that Trump’s candidacy and now election have been characterized by his opaque positions on issues of great import (to which markets reacted negatively), his relationship with America’s technology sector is an interesting one, as it is here that he has the most clearly articulated (if a bit scatter-brained) policies. Trump’s policies, harmful to the line of business or otherwise, all signal a desire of his to return to a pre-globalization era, an objective antithetical to the aim of the tech industry