Canadian Investment Review

Surviving Trump: 6 Tips From David Frum

Written by Caroline Cakebread on Thursday, August 17th, 2017 at 10:35 am

david-frum-hires4Anyone surprised about U.S. President Donald Trump’s reaction to the events in Charlottesville over the weekend should keep one thing in mind: when it comes to history, Trump sees a blank slate. So, said David Frum, keynote speaker at this year’s Risk Management Conference, currently underway in Muskoka, Ontario. Frum reminded his audience of Trump’s fuzzy knowledge of historical figures such as Frederick Douglass, the 19th Century African American social reformer who Trump suggested was still alive and doing good work.

Today, however, Trump’s shaky grasp on American history is becoming even more dangerous as the President attacks his foes. “The White House is in meltdown mode and the president is lashing out,” Frum said, noting that Trump’s early morning Tweet about Amazon affected its market value. All this activity is coordinating with one of Trump’s policy planks – his promise to renegotiate the North American Free Trade Agreement.

“One would have hoped that this would have disappeared from Trump’s consciousness,” he said noting that “When Trudeau was visiting Washington, Trump was visibly bored by the whole thing.”

Not so, however: today, NAFTA negotiations remain front and centre for Trump – a key focus of an administration staffed by people who, Frum asserted, are unqualified and inexperienced “mini-Trumps who emulate his confrontational and aggressive style.”

Primed for confrontation

Frum pointed to opening statements from U.S. Trade Representative Robert Lighthizer as an example: “Opening statements should be unprovocative, dull and include vague statements of goodwill. Everything else happens behind closed doors. Lighthizer took a strong and aggressive position in his opening remarks.”

His lambasting of NAFTA contrasted with statements from his counterparts in Canada and Mexico and are a sign of things to come said Frum.

In an era of Trump, things that seemed like zero possibilities become possibilities or even a reality said Trump using the example of North Korea. Frum added that events over the weekend will only exacerbate the dangers.

Even corporate tax reform, which should have been a leading accomplishment of the Republican congress, is at risk as Trump puts himself at war with his own senate, criticizing people like Jeff Flake and “creating a sense of chaos and commotion that is damaging Republicans. As incumbents get frightened everyone looks out for their own safety.”

Frum left the group with a few tips for coping with the uncertainty surrounding Trump’s presidency, explaining that while people have become savvier about political risk, they still underestimate it again and again.

One – Prepare for paralysis

With the administration at odds with congress and the senate, it will be hard to get anything done – and even executive orders are failing to do the job since Trump’s staff are too inexperienced to properly craft them.

Two – Expect increasingly erratic behavior from the President

“People will come up with elegant analyses of his strategy and they will come up with elaborate theories,” said Frum. But the reality is that “he becomes more aggressive and erratic as he’s under pressure and we need to think very seriously about a democratic win in 2018.”

Consider Trump’s business decisions since the 2008 Financial Crisis. Said Frum: “Trump responded to his last round of business woes by opening up deals with corrupt people – involvements with Turkey and the Philippines and doing deals without any diligence about who he’s doing business with or asking where is this money coming from?”

Three – Negative polarization is real

Voting behaviours in the U.S. have become more polarized — “Americans are clearer on who they hate more – it’s called negative polarization and it’s how American politics work.” Trump captured this, buy at a cost said Frum: “Negative polarization manifests itself as demobilization” – in other words, people who vote against something are less likely to be loyal followers in the future. So, get ready for a possible Democratic win in 2021 as Americans show their dislike of Trump.

Four – Be aware of industries that are at risk from Democratic activism

There’s a high likelihood Democrats could be in power after 2021 – in the meantime, a desperate Trump might “start to do a bunch of unprincipled deals with Democrats” as he remains at odds with his own party.

Five – The NAFTA talks will be a bumpy ride

The Canadian’s strategy is to go slow and have nothing happen said Frum. “Although President Trump could cancel NAFTA, it would cause the collapse of the American stock market. Most of the time he remembers that — but any day he could say something that could hurt the valuation of a cross border company like Amazon.”

Investors need to be prepared for price risk and the fact that “the security and stability of the world economy and its security are in some very unstable hands not motivated by a political agenda but by the personal views of a Narcissist.”

When it comes to manufacturing, however, the shift is to integration among multiple countries and economies: “The overwhelming consensus is that this is good thing. The North American trade economy is a trillion dollar a year enterprise – and that’s only trade. Any small change could have huge impact.”

Many states know this – Arkansas and South Carolina are major trading economies. The problem is that the administration isn’t experienced – rather it’s a group of people trying to “impress the boss. They are putting NAFTA at risk.”

Six – Trump will be here until 2021 at least

Impeachment and the 25th Amendment are, in Frum’s view, not real options – so get ready to ride out the Trump presidency for the next few years at least. Even Russia likely won’t be enough to shake up said Frum – although we won’t know for another six to nine months as Mueller does his work.

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