How Trump impacts Michigan autos, healthcare and energy policy

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:

Trade

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.”

Health care

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.

Other policies

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.

About The Author

Lindsay VanHulle

Lindsay VanHulle covers business and Lansing for both Bridge and Crain's Detroit Business. She can be reached here. 

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Comments

BigDCvx
Mon, 11/14/2016 - 8:12am
Trump is a negotiator. You negotiate from strength, you feint and you threaten. Tariffs are a negotiating point. We need the Chinese to play more fairly. They are tough negoitators too (though their adversaries before were not so much). We'll see how it works out. Obamacare/medicare doesn't do anything effective to cause medical costs to decline (the opposite). Freeing the market would. Costs go down (good), jobs are lost (not so good), but that's "creative destruction" of a free economy--booming economy provides new job opportunities. Obamacare is another budget-buster that isn't effective, and needs to go. Regarding energy policy--time to get back into the nuclear power business...proponents of "renewables" to limit release of CO2 are hypocritical if they oppose nuclear. The problem is the entrenched "Linear No Threshold" (LNT) hypothesis for ionizing radiation exposure, which is wrong, but has guided world nuclear safety regulations for 50 years. Nuclear has become too expensive, and LNT has begotten general public radiophobia, stifling expansion and improvement of nuclear power. x-lnt dot org
Rich
Mon, 11/14/2016 - 8:25am
The ACA has become neither affordable nor a model for care. Yes, the federal government is subsidizing the premiums of many enrolled, but the deductibles and co-pays are not affordable for the average family. The paper this morning had a typical example, family of five paying $1,400 per month, and a $2,500 per person deductible. During the campaign, Mr. Trump spoke of many things that were not reported by the media, such as cross-state insurance pools, negotiations by the government with big pharma on drug costs (why should the US subsidize drug inventions for other countries like Canada), and the need for modern electronic records, among many other items which would decrease costs and/or improve care. I personally like a common sense approach to problem solving, something that has been lacking for many years in government.
Bill Hammond
Mon, 11/14/2016 - 9:58am
"Freeing the market" as BigCDvx suggests certainly did nothing to contain the price of prescription drugs prior to the passage of the ACA & expansion of Medicaid. Volume purchasing, as the ACA provides for is the only method of cost containment there is. Expansion, not contraction, is the answer.
Matt
Mon, 11/14/2016 - 10:23am
If you consider "Free Market" to mean consumers and providers making rationale decisions based on cost/price vs. value calculations, as far as health care is concerned, this system of incentives doesn't exist and nor has it (way before ACA) for a very long time. This may also go a long way to explain why in health care, we are where we are.
Frog
Mon, 11/14/2016 - 10:19am
I agree that Trump is misunderstood by the media and many voters as they are not accustomed to a "negotiator". That is how he describes himself. Having spent a career negotiating collective bargaining union contracts for employers, I recognize his bargaining style as the kind of First Offers I usually received from unions. The First Offers bore little resemblance to the Final Proposal which found its way into the contract. Trump's tone has already softened, e.g., the 60 Minutes broadcast of Sunday the 13th. Responsible leadership in the Congress will temper his rhetoric into new policy since he is a deal maker who is eager for a deal. It is not "business as usual" but it is not the end of the world either.
Matt
Mon, 11/14/2016 - 10:31am
The best hope for Michigan's auto industry is if Trump's admin kills Obama's fuel economy requirements. If these are even possible few will like the resulting vehicle and even fewer will be able to afford them.
Kevin Grand
Wed, 11/16/2016 - 8:50am
I see that Ms. VanHulle neglected to mention that under the proposed numbers for Snydercaid (passed against a massive backlash against it), there were only supposed to be 323,000 people signing up in the first year and no more than 477,000 after that. Well, lookee here: 630k+ Michiganians have signed up for it with that number continuing to go up geometrically. And the feds were only going to pay 100% of the cost for only 3 years. According to the last number I've read on this, Lansing will be needing about $385-million/yr. in just five years in order to cover that shortfall. Like him or not, the sooner President Trump can put a stake through the heart of this, the better!
RICK
Sun, 11/20/2016 - 11:17am
Everyone seems to have concluded that Obamacare increased the cost of healthcare while the truth is that it bent the previously rising costs downward (LA Times): Healthcare costs in both the employer market and in Medicare have been rising at historically low levels since the enactment of the 2010 health law. This year, for example, the annual family premiums for employer-sponsored health insurance rose an average of just 3%, according to an annual survey by the nonprofit Kaiser Family Foundation and the Health Research & Educational Trust. And since 2011, premiums rose 20%, far lower than in the previous five years, when premiums jumped 31% and even lower than in the five years between 2001 and 2006, when they shot up 63%. Medicare has seen a similar slowdown, as the cost per enrollee has grown by an average of just 1.4% annually since 2011, according to the last report by the program’s trustees. That was the lowest growth rate in Medicare’s history, dating back to 1965. As for Rx costs: this was a political decision to allow big campaign contributions from big pharma by the Bush GOP with the Medicare Plan D act where it required Medicare to pay FULL RETAIL prices rather than pay what the VA paid. That's how we got to prices we suffer now. Will Trump or Congress do anything? NO. They want those contributions and don't care what consumers say. Ditto for those millions of TV ads ('Ask your doctor about XXX') that push consumers to demand drugs that are only marginally better than existing drugs (at huge price increases) - take them off their air. That was the rules years ago and it worked.
ArtZ
Sun, 11/20/2016 - 1:47pm
Afraid the Bridge is reeling from the shock of Trump winning. This resulted from the flawed Clinton DNC candidacy. The good news is from state legislatures, governors, federal legislators and president are GOP controlled. Thus MSM, reporters and educators will learn the limits of their bias. Not to mention the supreme court. President Obama's Nobel prize just plain over shadowed his actions until events swallowed up the remembrance of the day.
Rick
Sun, 11/20/2016 - 3:08pm
Medical care started it's downhill course when it became a big money for investors. No person in the world should make money from another person's misfortune or medical illness. Doctors of the past became doctors to help mankind, not to get rich. They were paid what a person could afford, sometimes a chicken or a returned favor. Today our children become doctors to get rich, not help people. You can't really blame them, we created the system. Drug companies no longer look for cures, my own doctor informed me that there is no money in cures. When was the last time you heard of a cure for anything, it's always just another super expensive treatment for a life long illness, talk about job security. Everyone including our elected paid for idiots know what it would take to solve or at least improve the problem, they just don't have the cahoots to stand up and make it happen. We are all able to afford power for our lights at night because some smart individual realized that such an invention should be able to be afforded by all, that's why it is regulated and subsidized so that know one gets rich from it. All of our medical discoveries should be available to all, not just the rich and most fortunate. Maybe drugs would be cheaper if the companies didn't spend billions on advertising, our doctors are well aware of all the new drugs, and if they are good they will use them. It's time we get back to the real reason for medicine, it's to save our lives, not take our house when we can't pay the bill.