Trump is becoming the backfire president

Senior Columnist
Yahoo Finance

If you were Jeff Bezos, what would you do?

The Amazon (AMZN) CEO faces a new dilemma, since President Trump is now threatening punitive action against his company—and may have the power to follow through.

Trump argues (in a series of tweets) that Amazon gets a sweetheart deal with the US Postal Service, shipping products below cost, with taxpayers essentially subsidizing the deliveries.

That’s probably not true. The Postal Service’s contract with Amazon is private, so we can’t know for sure, but federal law requires the USPS to price package delivery at rates that are profitable. Package delivery is actually a bright spot for the Postal Service—an area of growth amid a long-term decline in regular mail. Instead of ripping off the USPS, Amazon is probably helping keep it alive.

Trump can’t just tear up Amazon’s contract with the USPS. But he could insist on tougher terms whenever the contract is up for renewal. He could also put regulatory barriers in the company’s way, even if courts might strike them down, which helps explain why Amazon’s stock has tanked since Trump started his latest tirade against the company.

So if you were Jeff Bezos, what would you do?

You’d probably explore options for reducing your exposure to Trump and the government he oversees. Amazon already plans to develop its own logistics business, with a pilot program due to start later this year. It might make sense to speed that up and go big, so that Amazon can deliver its own packages and free itself of political meddling relating to the Postal Service.

If it did, the Postal Service would lose one of its biggest customers, while gaining a tough new competitor in the (lousy) bargain. That could make the Service’s chronic financial woes even worse. But Trump doesn’t seem to care about the consequences of his actions—which is turning him into the backfire president.

Trade-war jitters

The Trump tariffs are on the verge of backfiring, with China announcing retaliatory measures and financial markets quivering at the prospect of escalating trade disputes. The new China tariffs would cover about $3 billion of US imports to China, matching duties Trump plans to impose on about $3 billion of aluminum and steel imported to the United States from China. But much bigger retaliations are probably coming. In addition to the steel and aluminum tariffs, Trump has announced new tariffs on about $60 billion of other Chinese imports, and China is likely to respond in kind with tariffs on the same value of U.S. imports to China.

Trade-war jitters, triggered largely by Trump, have helped send the S&P 500 down more than 4% so far this year—despite tax cuts that should push both profits and stock prices up. Trump watches markets closely and probably assumes stocks will recover. Yet he recently threatened, again, to single-handedly kill the North American Free Trade Agreement, which would undoubtedly send stocks down even further. Stock prices are signaling a significant problem.

Trump’s decision last fall to kill DACA, the Deferred Action for Childhood Arrivals program, is also in the process of backfiring. Trump ordered Congress to pass a law resolving the fate of some 800,000 “Dreamers” brought to the United States illegally as children. But Congress hasn’t, and doesn’t seem likely to, at least not this year. Courts are now reviewing whether Trump’s action is allowable, while Trump fumes—over his own decision.

What other Trump moves might misfire? His tax cuts could certainly have a downside, since they’re likely to stoke economic growth this year, but perhaps curtail it after that. Lower corporate tax rates will leave companies with more money to spend. But the government will lose revenue and have to borrow more, which could crowd out private investment and depress growth. And if voters think the tax cuts mainly benefit the wealthy, they could punish Republicans by voting against them during the midterm elections in November.

Trump is shrewd in at least one crucial way—he knows how to connect with voters fed up with self-important politicians who talk down to them. But Trump also seems so sure of his own success that he disregards consequences likely to jeopardize his own goals.

Americans generally like Amazon. They want stocks to go up, not down. They’re inclined to let Dreamers stay. And they don’t want major disruptions to the economy. Trump acts as if everything will all work out, no matter how loudly he barks. There are a growing number of indicators he’s wrong.

Confidential tip line: rickjnewman@yahoo.com. Encrypted communication available.

Read more:

Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman

Follow Yahoo Finance on Facebook, Twitter, Instagram, and LinkedIn

What to Read Next

Back