Hard-bargaining Trump flusters U.S. businesses
Punitive tax, Air Force One tweets prompt fears
Donald Trump promised to make better deals as president, and wasted no time brokering what he said Tuesday would be a $50 billion investment in the U.S. by a Japanese telecom company, but his hard-bargaining style also is rattling some American businesses.
Boeing’s stock price took a nosedive after Mr. Trump posted a Twitter message Tuesday morning declaring that the Pentagon should cancel its $4 billion contract for a new Air Force One, just days after the president-elect stirred fears of trade wars by threatening — also on Twitter — to slap a 35 percent punitive tax on companies that move factories abroad.
Whether making threats against American companies or announcing the creation of tens of thousands of jobs in the U.S., Mr. Trump’s moves were entirely unpredictable — a quality that tends to unnerve financial markets.
Mr. Trump emerged from an elevator in the lobby of Trump Tower accompanied by SoftBank CEO Masayoshi Son, surprising reporters there with an announcement that the Japanese telecom executive had committed to a $50 billion investment in U.S.
startup companies that would create an estimated 50,000 jobs.
It was the second time before taking office that Mr. Trump scored on the jobs front. Last week he announced that he helped convince Carrier to reverse plans to close its Indiana factory and move to Mexico, saving 1,100 jobs.
“He is one of the great men of industry,” Mr. Trump said of Mr. Son, with whom he met during a day otherwise occupied with interviews for Cabinet posts. “One of the truly great men.”
“I just came to celebrate his new job,” said Mr. Son. “I said, ‘This is great, the U.S. will become great again.’”
Earlier in the day, it was Boeing that got taken by surprise. Mr. Trump tweeted: “Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!”
The price tag cited by Mr. Trump includes the lifetime cost of the whole program, including research and development and the actual building cost for the two aircraft needed for the Air Force One fleet. The Pentagon ordered the two specialized airplanes last year, and they are scheduled to be ready in 2023.
Shares of Boeing stock dropped by more than 1 percent in premarket trading after the tweet, but the price climbed back by the end of the day.
Mr. Trump’s sparring with U.S. companies comes as he stacks his Cabinet with business titans, including naming hedge fund billionaire Steve Mnuchin as treasury secretary, billionaire investor Wilbur Ross as commerce secretary and retail billionaire Betsy DeVos as education secretary.
He interviewed Exxon CEO Rex W. Tillerson for secretary of state Tuesday.
The jab at Boeing, which Mr. Trump later accused of “doing a little bit of a number” on taxpayers, ruffled feathers at America’s biggest exporter and irked financial analysts.
“The chilling effect on industry is huge, if you are a contractor,” Franklin Turner, a partner specializing in government contracts at law firm McCarter & English, told Reuters news agency. “To think that in 140 characters the president can cancel a program is ridiculous. There would be a detailed review by legal professionals on the merits of the termination.”
Mr. Trump experienced similar backlash from Republicans on Capitol Hill when he tweeted about punishing U.S. companies with a 35 percent tariff on their products. They warned he would start a trade war and that U.S. businesses from automobile companies to farms would suffer.
Doug Oberhelman, chairman of the Business Roundtable, conceded that Mr. Trump’s tactics could be uncomfortable for those taking their turn “in the bull’seye,” such as Boeing or Carrier.
“If we combine that with policy of a very aggressive pro-job creation environment, I think we’re going to be happy with the end of that,” said Mr. Oberhelman, who is chairman of Caterpillar Inc.
Mr. Trump didn’t go into details about the Boeing deal but said the price tag was just too big.
“We want Boeing to make a lot of money, but not that much money,” he told reporters during an earlier appearance in the lobby of Trump Tower.
Trump transition team spokesman Jason Miller said that the details of budget-cutting decisions would be announced after Mr. Trump takes office Jan. 20. In the meantime, he said, the president-elect was signaling his intention to be a careful steward of taxpayer dollars.
“The message is clearly been sent that we are going to look to save taxpayers’ money,” he said. “People are really frustrated with some of the big price tags that are coming out for programs, even in addition to this one. So we are going to look for areas where we can keep costs down and look for ways where we can save money.”
In a statement responding to Mr. Trump’s tweet, Boeing said its current contract is only worth $170 million, presumably not including sunk costs and later contracts should the program come to fruition.
“We are currently under contract for $170 million to help determine the capabilities of these complex military aircraft that serve the unique requirements of the President of the United States. We look forward to working with the U.S. Air Force on subsequent phases of the program allowing us to deliver the best planes for the President at the best value for the American taxpayer,” the statement said.
The presidential aircraft is more expensive than a 747 made for one of the airlines because of the advanced communications equipment, security measures and other special features that make Air Force One a flying Oval Office.
Aerospace industry expert Richard Aboulafia called Mr. Trump’s criticism of the cost “complete madness.”
“It’s actually what it costs to have two airplanes that can survive a nuclear war and transport the president in times of national emergency, and any other time for that matter,” he told Seattle’s Morning News. “Is Boeing getting rich on this deal? No, far from it.”
The life span of the aircraft is about 30 years. The current fleet is more than 20 years old.
White House press secretary Josh Earnest, flying aboard Air Force One, defended the contract to build a new plane and suggested Mr. Trump had incorrect information.
“Some on the statistics that have been cited, shall we say, don’t appear to reflect the nature of the financial agreement between Boeing and the Department of Defense,” Mr. Earnest told reporters.
He noted the “unique technical requirements” of Air Force One and said Americans “would expect that future U.S. presidents would benefit from unique and upgraded capabilities while they are traveling and representing the interests of the United States around the world.”
He said the current Air Force One is nearing the end of its projected life, and said the administration’s work would ensure that future presidents have a “modern presidential aircraft.”
President-elect Donald Trump promised to make American more business-friendly, however, his tweets about the cost of Air Force One upgrades caused Boeing stock to drop.