It's true that chief executive officers' confidence in the U.S. economy reached a record high in 2018, but that was before.
Before President Trump imposed stiff tariffs on steel and aluminum imports on national security grounds, before trading partners threatened retaliation, before the White House shrugged off the concerns of congressional Republicans and before the man who campaigned on a protectionist trade policy dropped broad hints that he may raise other import duties, too.
"Our message on trade to the administration is clear," Business Roundtable CEO Josh Bolten told reporters on Tuesday. "Missteps on important elements of U.S. trade policy will undermine economic progress -- and the great economic progress that’s been realized so far from tax reform and regulatory relief -- perhaps even reverse it."
Such concerns dampen the enthusiasm that CEOs of Business Roundtable members, who represent the largest 200 U.S. companies, expressed in a quarterly survey from Feb. 7 to Feb. 26, the results of which were released Tuesday. Their responses were gathered just weeks after Congress approved lowering the top corporate tax rate to 21 percent from 35 percent and creating a territorial system in which overseas earnings won't be taxed after a one-time assessment on existing assets.
The questionnaires, which measure plans for hiring, capital investment and sales, feed the Washington-based organization's CEO Economic Outlook Index, which increased to 118.6 in the first three months of 2018, the highest since it began in 2002. Index readings range from -50 to 150, with any reading below 50 indicating the economy is contracting. Sub-indexes for sales, capital spending and hiring climbed to 141.9, 115.4 and 98.5, respectively.
The numbers show companies are responding both to the tax cuts and loosening of federal regulations on businesses from banks to internet-service providers, which Trump argued was necessary to buoy economic growth, but they don't provide insight into fallout from the tariffs. While the president has already exempted Canada and Mexico from the duties -- pending renegotiation of the North American Free Trade Agreement -- and indicated he may exclude other allies too, economists have warned his action could easily damage the corporate confidence needed to drive investment.
U.S. trading partners have threatened to respond to the U.S. tariffs with higher duties of their own, spurring Trump to suggest he would retaliate in kind, with levies on European automobiles, for instance.
"Predictability and consistency are absolutely crucial for all our CEOs' planning," said the Roundtable's Bolten, who once served as chief of staff for former President George W. Bush. That's one of the reasons Trump's loosening of regulations imposed under his predecessor, Barack Obama, was so important, he said: "Executives now feel there's not some sucker punch waiting around the corner to hit them with a new regulatory barrier."
Trump's trade policy, however, could upend that view. In addition to the metals tariffs, the administration's trade chief is reviewing whether China has violated U.S. intellectual property rights and his findings could prompt retaliatory duties against the world's second-largest economy. The fate of NAFTA, which is relied on heavily by retailers, is uncertain too, with Trump frequently expressing dissatisfaction with the treaty.
Business Roundtable CEOs, who represent nearly 30 percent of total U.S. stock market value, are particularly concerned about the direction of NAFTA talks, Bolten noted.
They are "strongly opposed to any direction in the negotiations that might result in the United States withdrawing from NAFTA, which would be a disaster not so much for the Canadians and Mexicans, but for U.S. businesses and exporters," Bolten said. "We are staying heavily engaged across the trade front, and we are hopeful that the administration will listen."
While Trump has correctly pointed out some major issues around trade, the best way to address them is to "think through it strategically with allies and make sure we're doing the right thing and not doing these one-off things, which tend to backfire," said Business Roundtable Chairman Jamie Dimon, who's also the CEO of JPMorgan Chase, the largest U.S. lender.
The president and some of his advisers maintain that protectionist actions are necessary to narrow a trading imbalance that grew to $568.4 billion last year, while economists caution that international commerce isn't a zero-sum equation, especially with consumers supporting more than half of the $20 trillion U.S. economy.
"If business cannot rely on the administration to play the usual role that the U.S. plays in sustaining an open trading environment," that's a major headwind, Bolten said. "Threatening to run around the world raising our tariffs to match higher ones elsewhere in the world is a recipe for disaster and a cascading trade war."