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Industry will be freed from meddling regulation. Manufacturing will have access to cheap energy, making it more competitive against the rest of the world. The United States will be cut loose from global agreements, and allowed to forge its own path. It is not hard to understand why Donald Trump took his decision to take America out of the Paris climate change agreement and why he sees it as part of his mission to revive the country's traditional economic base. There is a problem, however, and it's not a minor one. He has got it completely wrong.
Opting out of Paris is not going to make any significant difference to US industry. All he is doing is cutting American business off from the rest of the world. There will be a price to be paid for that and investors are going to notice.
Why? There are four main reasons. First, businesses have already adjusted to the costs of climate-change legislation. Most firms know what the rules are, and have started to take account of them. If they need to buy new equipment, switch the kind of fuels they use, or to make manufacturing processes less energy intensive, they have already spent the capital to make those changes, and they can't take it back. So there won't be any benefit from reversing course.
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Second, the only companies that are likely to see any savings are old smoke-stack industries. Sure, those were the kinds of blue-collar jobs that Trump promised to bring back during his campaign. But nobody probably not even the people who work in them can really claim they are the future. Pulling out of the Paris agreement was fiercely opposed by business leaders such as Tim Cook of Apple and Michael Bloomberg, the former New York mayor and founder of the financial data firm. There is a lot more growth to come from the likes of Apple and Bloomberg than there ever will be from steel mills and metal bashers. The businesses that really matter won't see any gains at all.
Third, there is huge growth to come from alternative energy sources, which are turning into one of the biggest industries of the 21st century. True, some of these technologies need subsidies and regulation initially. But solar power allied to cheap, high-capacity batteries is proving economically viable. Those that take a lead in that will do brilliantly. The US, with its technological and entrepreneurial tradition, should be one. But it won't if it opts out of the race.
Finally, Trump is taking the United States out of the global consensus. If he thinks the Paris accord was that bad, why not work with other counties to reform the agreement? It was hardly necessary to opt out unilaterally. It is increasingly clear that Trump's America is going to be an isolationist state, with very little interest in working with other nations. For its multinationals, there may not be an immediate price to be paid for that but little by little they may find they have no voice in decisions the Europeans, Chinese, Japanese and others are making. And that is going to hurt.
After six months, Trump is becoming a slow-motion disaster for the US economy. The threat of impeachment hangs over him. There is no sign of the promised tax reforms. A renewed push on infrastructure this week amounted to a six-page plan with no funding in place. Meanwhile, Trump is losing allies around the world, and taking the US out of issues and debates it has usually led. It will take a while for business to be affected by Trump's erratic judgements. But sooner or later it is going to happen and the economy and stockmarket won't look so strong when it does.
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Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.
He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.
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