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Original article URL: http://bridgemi.com/2016/11/how-trump-impacts-michigan-autos-healthcare-and-energy-policy/
14 November 2016
Businesses hate uncertainty.
Right now, there’s a lot of it going around, since Republican Donald Trump defied pollsters’ data to clinch the presidency last week over Democratic rival Hillary Clinton — the first time Michigan has gone for a Republican presidential candidate since 1988. His business background and anti-establishment rhetoric appealed to voters who say they wanted change in Washington. But Trump’s controversial comments about women and minorities and his lack of government experience have also provoked anxiety about how his White House will operate.
Southeast Michigan business leaders say they hope Trump proves his critics wrong.
“Look, I think this was not an outcome (executives) built into their expectations,” Patrick Doyle, president and CEO of Ann Arbor-based Domino’s Pizza Inc., said Thursday. “But I’ll say we’re not operating any differently than we were three days ago.”
In coming weeks and months, Trump will appoint his Cabinet leaders and begin to develop a plan for his first 100 days in office that could have ramifications for everything from global trade to health care. Here’s a look at the impact so far and what might be coming:
This week, Gov. Rick Snyder is in China on his sixth trade visit to the country as governor. He plans to promote Michigan’s automotive, agriculture and tourism industries as a way to encourage more jobs and investment in the state from Chinese companies.
A handful of Chinese firms in the past year have announced plans to expand Michigan facilities or build new offices here, which together are being touted to create hundreds of jobs.
Trump consistently targeted China on the campaign trail as an example of what he said are broken economic policies that led companies to move jobs overseas. Charles Ballard, an economist at Michigan State University, told Bridge and Crain’s that early volatility in the stock market following Trump’s election was Wall Street reacting to Trump’s protectionist trade platform that would impact bottom lines of the state’s largest industry — cars.
“If Mr. Trump follows through with what he has advocated, we will see some of the highest tariffs in U.S. history levied against imports from China and Mexico,” Ballard said. “That would cause a lot of disruption in the supply chain, because a lot of goods imported from Mexico involve parts that were made in the U.S.”
Snyder, who said there are trade-related issues that need to be resolved with China, also thinks establishing relationships with government and corporate leaders in the country could be productive toward a solution.
“I don’t think it’s time to prejudge things. Let’s just give (Trump) a chance to establish his administration,” said Snyder, who declined to disclose which candidate he voted for president. “In the meantime, we have an opportunity to promote Michigan.”
As for the governor’s future work with China, Snyder said: “I don’t see any reason at this point why that should change at all.”
Trump’s platform on trade — scrapping or renegotiating the North American Free Trade Agreement and imposing a 35-percent tariff on cars imported from Mexico — has Wall Street skittish on autos.
For instance, Southfield-based Lear Corp., lost nearly $500 million in market value in trading Wednesday. Troy-based Delphi Automotive’s market cap declined by more than $1.2 billion. That’s despite an increase of nearly 300 points in the Dow Jones industrial average.
Trump’s presidency is a mixed bag for diverse manufacturers, said Joseph Anderson Jr., chairman and CEO of Wixom-based supplier TAG Holdings LLC.
TAG’s largest customer is heavy equipment manufacturer Caterpillar Inc., so Trump’s call to boost infrastructure spending could mean significant sales increases for TAG. But Trump’s call to unravel free trade deals and punish manufacturers importing from Mexico would damage TAG’s auto business, Anderson said.
“I’m nervous. We all heard what he said on the campaign trail,” Anderson said. “We should not be disassociating ourselves from the global economy, and if he accomplishes some of the things he said — well, that’d be very troubling.”
Anderson, a former chairman at the International Trade Administration’s manufacturing council, said President-elect Trump should instead focus on tax reform to incentivize businesses to bring back manufacturing to the U.S. For example, Anderson said, altering the tax code to stop taxation on global profits for U.S. companies.
“I don’t know what his real plans are,” he said. “We definitely need to hear more.”
Trump, bolstered by a Republican majority in Congress, has proposed repealing President Obama’s signature healthcare law, the Patient Protection and Affordable Care Act, known as Obamacare. That could radically alter the business models many Michigan companies have developed the past five years.
The law has covered an additional 22 million people with medical insurance, funded thousands of health clinics for the poor, provided subsidies for private health insurance to millions of lower-income people and created Medicare pilot programs to improve quality and lower costs.
Critics of Obamacare in Michigan have pointed to 17 percent average premium hikes in the individual health insurance market for 2017. However, the number of people affected are only about 3 percent of the state’s insured population, and 85 percent of those receive federal subsidies to lower their premiums.
Trump has promised to turn federal Medicaid funding over to the states in the form of block grants to give more local control over health funding. This means states will decide who gets Medicaid and how many, what services they receive and, ultimately, how much government will pay for it. But that also most likely means doing away with additional funding that helped expand Medicaid, which has extended coverage to an additional 630,000 Michiganians.
Rick Murdock, executive director for the Michigan Association of Health Plans, said if Congress uses the budget reconciliation process, it would need only 51 percent approval from senators to defund federal Medicaid expansion.
“With that, the loss of coverage for 600,000 folks,” said Murdock. “We have a risk of losing the federal subsidy (advanced tax credit) for the individual market on the exchange and the potential of those folks losing coverage.”
Cutting Medicaid also poses risks to the 14 Medicaid HMOs in Michigan such as Meridian Health Plan in Detroit and Priority Health Plan in Grand Rapids — major businesses employing thousands of people. Companies that hired dozens of people to account for additional Medicaid beneficiaries will seek to downsize if profits go down.
Trump has been somewhat vague on his overall plan. But he has said he wants to expand the use of private health savings accounts, which allow individuals and families to set aside money tax-free to pay for insurance premiums and drug costs.
Efforts to repeal or replace Obama’s health care law will be more challenging than the simplistic rhetoric used during the campaign, said Tom Shields, a Republican consultant and president of Lansing-based public affairs communications firm Marketing Resource Group. Any attempt will have to run the program more efficiently and cost-effectively without yanking millions of Americans’ medical coverage, Shields said.
Trump has taken a pro-coal energy stance, which makes it difficult to know how he will come down on Obama’s energy policies — including whether he will roll back ongoing federal efforts to reduce carbon emissions. During an address to the Detroit Economic Club at Cobo Center in August, he vowed to end the “Obama-Clinton war on coal” and reinvest in coal mines.
Michigan lawmakers are debating new energy legislation that would require utilities to consider renewable energy among a number of power sources as they plan for future electric generation. Meanwhile, utilities in the state — including Detroit-based DTE Energy Co. and Jackson-based Consumers Energy Co. — are decommissioning coal-fired plants as they age. They would consider natural gas, not coal, as replacements.
Automakers are also pushing for a relaxing of fuel-efficiency targets the Obama administration ruled the industry would need to meet by 2025.
And Michigan will continue to pursue federal funding and a designation for the planned American Center for Mobility driverless car testing site at Willow Run, said Kelly Chesney, a spokeswoman for Business Leaders for Michigan, the state’s business roundtable. The mobility center has lined up about $20 million in state funding, but has yet to receive about $60 million in federal aid it needs to operate.
“That’s one of our highest priorities,” Chesney said. “The need still exists, regardless of who is our president, and this industry is still moving forward. And it affects the entire nation.”
Crain’s Detroit Business reporters Dustin Walsh and Jay Greene contributed to this report.