Corporate uncertainty about whether the Trump administration will be able to deliver on numerous promises — including tax cuts, health care, a China crackdown and infrastructure — has forced many companies to put important hiring and investment decisions on hold, potentially crimping an economic expansion that appears ready to accelerate.
A Washington Post review of dozens of conference calls in recent weeks between chief executives and analysts show how the fog of policymaking is paralyzing many companies from taking risks that in normal times would help them grow. The conference calls were held as part of a quarterly ritual in which executives discuss their firm's performance and outlook for the future, and they give voice to some of the reasons U.S. economic growth has been so weak at a time when inflation and interest rates remain historically low.
One manufacturing company is having a hard time making acquisitions because other companies are waiting to see what happens with tax incentives.
A staffing executive says firms are still hesitant to boost hiring until they know more about what Washington plans to do on taxes and regulation.
A financial industry CEO, Ronald Kruszewski of Stifel, said that investors are nervous about new opportunities because of “lack of clarity from Washington on deregulation and tax policy.”
CSX chief executive E. Hunter Harrison said, “I’ve never been through a time when this country is like it is, politically, ever.”
“I’ve never dreamed of a time like this,” Harrison told analysts during a recent conference call to discuss the performance of his railroad company. “So I don’t know what’s going to happen in Washington, and the scary thing is I don’t think they’ve got a clue, either.”
Many of the executives did not blame President Trump or Congress directly for the uncertainty, but they remarked that promises made at the beginning of the year have not come to fruition and might not anytime soon.
“What we need is predictability,” Craig Arnold, chief executive of Eaton told analysts during his recent call.
Eaton is a power-management company that was founded in the United States but is now based in Ireland, where corporate taxes are lower.
“And I think in this environment of uncertainty … it simply freezes the investment community. And so I think more than anything, what the business community needs is some certainty around what the policies will be,” Arnold said.
A number of chief executives said they were very encouraged by the policies Trump was pursuing but said they were still waiting for final decisions to be made.
John Ferriola, chief executive of steel giant Nucor, said on his earnings call that there was a “positive view coming out of Washington” that “could have an impact on our volumes, and it will be a positive impact, without a doubt.” He added: “President Trump has made some commitments to us, and we expect him to stand behind those commitments. We're certainly working to make that happen.”
Trump has proposed slashing the corporate tax rate from 35 percent to 15 percent, rewriting health-care rules, getting rid of 80 percent of all regulations, toughening trade relations with China, Mexico, South Korea, and Canada, and creating a $1 trillion infrastructure package.
He has speculated about elevating one of his top economic advisers — Gary Cohn, a former Goldman Sachs president — to become the new Federal Reserve chairman, which could have a direct impact on future interest rates, and he has nominated former congressman Scott Garrett to lead the Export-Import Bank, though he used to oppose the agency’s existence.
These changes, if followed through on, would have major consequences for the economy and thousands of businesses. But now they are in policy limbo and haven’t come to fruition, as the president and the Republican-led Congress try to absorb the lessons from their failed attempt to repeal and replace the Affordable Care Act.
“When policy uncertainty goes up, firms that are more exposed to the policy have a bigger pull back,” said Steven Davis, a professor of international business and economics at the University of Chicago Booth School of Business.
He said so many policies are up in the air that “at this point it’s not clear a lot will happen,” a sentiment shared by a number of top executives.
Arnold, the Eaton chief executive, said it was “difficult to really take much to the bank in terms of what we’ve heard from the administration to date in terms of their ability to get legislation through.”
Companies seemed to express the most confusion about what might happen on tax policy.
Scott Page, the chief executive of CoBiz Financial, a Denver-based financial services firm, told analysts the banks he runs in Colorado and Arizona have “purposefully pulled back” from financing public projects, waiting “until there is better clarity from Washington D.C. on corporate tax rates.”
BOK Financial executive vice president Stacy Kymes remarked on the Oklahoma bank’s call that lending for commercial and industrial projects “was essentially flat.”
“We believe that the uncertain environment in Washington relative to tax policy is stalling growth and that some certainty around the administration and Congress’s future direction will free up new deals that are waiting on the sidelines,” Kymes said.
The cautionary talk can seem oddly out of place when the stock market is at record levels, unemployment is low and corporate earnings are high — things Trump has touted for weeks.
But that picture of the economy doesn’t tell the whole story.
The economy is growing, albeit slowly. Inflation is low. Interest rates are low. But business confidence, much higher than it was during the Great Recession, has retreated a bit since June. Consumer confidence, too, was at a 12-year high, but it has also eased.
Companies are hiring, and the economy added 209,000 new jobs in July. Businesses are investing. But the remarks from corporate executives suggest they could be doing even more. A number of companies are still hesitant to expand, waiting for more direction from policymakers about things like taxes and regulations.
“The sentiment remains high amongst our middle-market client base,” said M. Keith Waddell, president of Robert Half International, a staffing company. “But they’re wait-and-see types, and they’re still waiting to see.”
Many companies had high hopes for Trump’s promised infrastructure plan, but that effort has been delayed in part because the White House hasn’t decided how to finance it or pitch it to Congress.
That means a number of infrastructure projects have been sidelined, Husqvarna chief executive Kai Warn told analysts on his recent call. This Swedish company makes power equipment like chain saws, lawn mowers and garden tractors, among other things, and it has a large presence in the United States.
“There was an expectation that the Trump infrastructure efforts would materialize a bit early,” he said. “That hasn’t come through. And now everybody sits with a lot of other projects which they need to put into implementation.”
John Wren, chief executive of Omnicom Group, a global marketing firm, said many companies are holding back from investing on things like advertising until they have a clearer picture on “where the government’s moving.”
“There’s nobody who can look out two or three years at this point and say with certainty that they’re going to know what tax policy is, what health-care costs are going to be,” he said. “And so I think that causes many companies to pause in terms of the investments that they’re trying to make, and advertising and marketing is part of what suffers along with other businesses as that occurs.”
On some Washington issues, such as whether lawmakers would agree to raise the debt ceiling, chief executives didn’t even want to speculate.
JetBlue Airways chief executive Robin Hayes was asked what would happen if there’s a government shutdown in October, a real possibility that would impact airports and travel.
“Well, I’ll avoid the questions on the government shutdown, if that’s okay,” Hayes responded.
The White House and congressional Republicans are planning to make a big push on their effort to cut taxes in the coming weeks, aiming to rework the tax code for the first time in 31 years, but passage of these changes will be difficult because they haven’t yet agreed on what the cuts should look like.
And the White House is also promising to jettison numerous regulations in a way it says will help companies, but this process could take years and run into bureaucratic and legal challenges.
In the meantime, a number of companies are sitting tight or plan to forge ahead, cautiously.
“We came out of an election and people were waiting to see what was going to happen, if anything,” Gregory Sandfort, chief executive of Tractor Supply Co., a home improvement chain, told analysts on his call. “And I think once we got through that cycle, second quarter needs surfaced and people came back out and shopped … I like the footsteps. I like the fact that we were able to maintain our business in big ticket. So I feel good that the consumer is feeling comfortable right now. Hopefully, nothing else in Washington can sway them the other direction.”