Monday, February 13, 2017

Uncertainty: the law of unintended consequences

A new administration always brings change to the economic/politics landscape and it's inevitable. The work of Trump and his crew falls well within the scope of what other presidents have done. As en example Obama's first executive order was to close Guantanamo Bay prison -- 8 years on its still there, so although the act was serious (and to many American was a terrible idea) it remained that many executive orders go nowhere.

Now, Trump has a way with words and seems generally undiplomatic, the fact that he seems to have difficult conversations with several world leaders -- and even hung up on the Prime Minister of Australia says more about Trump then them! This is an unusual situation that has consequences -- Trump will receive little respect from world leaders when he needs to negotiate with them.  Trump cancelled the TPP -- its his right, but if he was looking for a way to "manage" China -- the TPP was a good way of getting started.  

However, Trump's recent tweets about legal immigrants (H-B1 & students visa) are more troubling. Students who are considered the US may decide that they are better off elsewhere -- a short term win for Trump, but negative long term implication for America.  When the best and brightest no longer consider the US as a prime destination for their education it has long term implication for America. HB1 visa holders face a similar dilemma; companies are telling their HB1 visa holders that they are far from certain that they will be able to renewed their visa's when they expire. These workers will look for alternatives where they will not face the risk of being kicked out of the country. 

These workers are looking for jobs elsewhere. Companies that were thinking of relocating their offices in the US are re-thinking their strategy, and big US tech firms are looking to expand foreign campuses. These workers are America's edge today -- its not assembling iPhones (despite what Trump seems to think) the vast majority of the value of the iPhone is in America, and not in the cost of assembly (which is around $10 per phone), the balance is value added to Apple...

If America is no longer seen as a land of opportunity for the best and brightest, then the best and brightest will go elsewhere, and that has implication for America, where Trump wants GDP growth to exceed 3%. 

However, people pay attention to these statements; the red states love it others who pay attention are those potentially affected by these changes -- if you've had words with HR over the past few weeks (and BTW you get weekly job offers) then you take it seriously, and may decided that America is no longer right for you. 

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