Banks could face looser regulations. Some manufacturers could boost jobs. Exporters might face higher tariffs. And construction companies could face labor shortages.
These are some of the changes that could be in store for North Carolina businesses under a Donald Trump presidency, experts said.
After the initial shock of Trump’s upset victory, major U.S. stock indices rose Wednesday, with the stocks of North Carolina-based companies such as Bank of America and steelmaker Nucor showing big gains. Duke Energy was among the companies whose shares slipped.
Mark Vitner, Charlotte-based senior economist for Wells Fargo, said overall he expects Trump’s presidency will be good for the economy in Charlotte and the rest of the U.S. “He’s going to be focused on economic growth,” Vitner said.
But the new administration also means uncertainty for future infrastructure projects in Charlotte such as rail transit. Under the Obama administration, the city has had an ally in Washington with former Charlotte Mayor Anthony Foxx serving as the U.S. Secretary of Transportation.
Manufacturing: Can he bring jobs back?
At a rally last week in Concord, Trump tapped into an economic issue top of mind for many workers in North Carolina: the loss of manufacturing jobs.
“At the core of my contract is my plan to bring back your jobs that have been taken away,” Trump said to raucous cheers.
The Carolinas were a hotbed of textile manufacturing until the 1990s, when foreign competitors started entering the market with cheaper labor and materials. Local textile mills throughout North Carolina have since shuttered, often leaving small towns reeling economically.
Trump has blamed that shift on the North American Free Trade Agreement signed into law by former President Bill Clinton. “We’re living through the greatest jobs theft in the history of the world,” Trump told the Concord crowd.
Wayne Cooper, Charlotte-based honorary consul of Mexico, said he’s waiting to see if Trump follows through on his plans to rip up trade deals.
“I think it’s a large unknown,” said Cooper, a free trade supporter who helped promote NAFTA in the 1990s. “Is he going to do what he said in the campaign’s rhetoric?”
The U.S. Department of Commerce estimates that North Carolina exports around $30 billion worth of goods a year, with Canada and Mexico – NAFTA countries – as the top two buyers of the state’s goods. China, another country Trump has promised to enact tariffs on, is the No. 3 market for North Carolina exports. More than 158,000 jobs in North Carolina were supported by exports last year, the government estimates, and the Charlotte region exports $14 billion worth of goods a year.
“You can’t just throw out free trade agreements,” Cooper said. “It’s a big shakeout. I honest-to-God don’t know.”
Mekael Teshome, economist for PNC Financial Services Group, said he expects Trump will have a “mixed effect” on manufacturing in Charlotte and the rest of North Carolina.
Improvements in the housing and automobile markets will likely continue under Trump, Teshome said. That could help companies such as Electrolux, a Swedish appliance maker that has its North American headquarters in Charlotte, he said. Trump is also expected to increase spending on defense and infrastructure, he added.
But manufacturers could also be hurt by any Trump proposals to place higher tariffs on goods from other countries, Teshome said. “Companies that are exposed to foreign trade are probably going to have a harder time,” he said.
Electrolux spokeswoman Eloise Hale said “policy issues such as tax, energy, trade and the environment are important to us,” adding: “We will continue to work with all levels of government, including the new administration, on policies that help grow the economy.”
A key adviser to Trump on trade has been Dan DiMicco, the former CEO of Charlotte-based steel maker Nucor who has argued that free trade policies have cost America millions of manufacturing jobs and shrunk its middle class.
Trump “needs to hold the world accountable to playing by the rules,” DiMicco told the Observer in June. Considered a possible commerce secretary candidate in a Trump administration, he did not immediately respond to a request for comment.
Nucor shares closed up more than 12 percent at $57.60.
Banking: Dodd-Frank’s days may be numbered
Shares of Bank of America and Wells Fargo surged more than 5 percent Wednesday on speculation that a Trump administration would loosen regulation on the banking industry.
As a first step, Trump will have the ability to appoint regulators who are more friendly to the industry than those picked by President Barack Obama, Keefe, Bruyette & Woods analyst Brian Gardner wrote in a report Wednesday. Getting sweeping changes through Congress, however, may be more difficult.
“The regulatory implications are more important than what might come out of Congress but are broadly positive for financials in our view,” Gardner wrote.
For Charlotte’s banks, a Trump presidency gives them another critic of the Dodd-Frank financial overhaul law, which has brought more regulations to the industry.
Trump has said he would move to repeal the law, signed in 2010 by President Obama in an effort to prevent another financial crisis. While “there are aspects of it you could leave ... generally speaking, Dodd-Frank stifles business,” Trump has said, arguing the law has harmed borrowers’ ability to get business loans.
Although Republicans kept control of both the House and Senate, Gardner said the chances for “wholesale changes” to Dodd-Frank are still low because Democrats have enough seats to block legislation. There may be bipartisan support, however, for regulatory relief for smaller community banks, he said.
“We see Trump’s election as more positive for smaller banks than larger banks,” Gardner wrote.
Whether a Trump presidency could lead to the breakup of big banks is unclear. Trump said he didn’t like the idea of dismantling giant financial firms in a 2015 interview, but he has also said he’s “not going to let Wall Street get away with murder.”
Speaking in Charlotte last month, Trump blamed the recent recession in part on former President Bill Clinton’s 1999 reversal of the Glass-Steagall Act. That Depression-era law kept banks from offering both commercial banking services (think taking deposits and making loans) and investment banking services, such as trading stocks and bonds.
In Charlotte, Trump urged a “21st century Glass-Steagall” as part of his plan to overhaul the financial system and support job creation. The banking industry has opposed such limitations, which could mean companies such as Bank of America, JPMorgan Chase, Citigroup and Wells Fargo would have to shed substantial portions of their businesses.
Immigration: Pressures on the labor market
Charlotte’s real estate market has been on a major boom for the past several years, with cranes dotting uptown’s skyline, new office towers popping up, and record numbers of hotels and apartments under development.
One wildcard: Will Trump be able to build a border wall with Mexico and deport millions of immigrants who are in the U.S. illegally, as he’s promised? Those ideas were a centerpiece of his campaign, with “Build the wall” chants ringing out daily from his rallies.
In February, with Trump surging in the primaries, Charlotte real estate developers on a panel said they were nervous about the potential for mass deportations and a border wall. Such policies could exacerbate an already tight labor market.
The Pew Research Center estimated last year that undocumented immigrants make up about 14 percent of laborers in the construction and extraction field, behind farming, where they accounted for 26 percent of workers, and building and grounds maintenance, where they make up 17 percent.
The Associated General Contractors of America said last week that construction employment in October increased to almost 6.6 million workers nationwide, up 195,000 from the same month in 2015. That’s almost double the rate of increase for all jobs, and the number of unemployed workers in the construction sector hit a 10-year low. The tight market is putting pressure on wages: Average hourly earnings for workers jumped 3.2 percent over the past year, raising costs for developers.
John Huson, longtime CEO and co-founder of Charlotte-based general contractor Carocon, said he doubts Trump will actually build a wall on the southern border.
“He’s not going to be able to do what he says he’s going to do,” said Huson. He said the construction labor market has been especially tight since the 2008 economic and ensuing recession, when many workers left for other careers or returned to Mexico, and few people came into the depressed industry to replace them when the market recovered.
“A lot of them went into other trades. A lot of them went home. A lot of them aren’t coming back,” said Huson.
Energy: No retreat from cleaner fuel
Trump has called climate change a “hoax” and promised to boost U.S. production of coal and natural gas, but Duke Energy and other utilities aren’t likely to abandon steps they’ve taken to reduce planet-warming emissions of carbon dioxide.
“The industry has figured out that clean energy is good for business,” said David Doctor, president and CEO of the Charlotte-based energy trade group E4 Carolinas. “It’s cheaper in the long run, but the industry is also sensitive to a clientele that wants to buy clean energy. They’re busy building that into their culture now.”
Duke has retired more than 40 of its coal-fired units since 2011, retiring seven power plants in the Carolinas and converting others to use natural gas fuel. Duke imploded its Sutton power plant in Wilmington early Wednesday.
“We have said before the election that whomever is elected president, we would be continuing to move our power plant fleet to lower carbon fuels,” spokesman Tom Williams said. “This has been driven by an array of federal emissions regulations, the economics of coal when compared to natural gas and the age and relative efficiency of many of our coal plants when compared to natural gas plants.”
Duke shares closed Wednesday down nearly 3 percent at $77.30.
Still, Doctor expects Trump’s policies will set the stage for a rebound in coal as “clean coal” technologies are developed. Shares of St. Louis-based Peabody Energy, the world’s biggest private coal company, closed up more than 50 percent at $12.91.
Jim Little, chairman of the Carolinas Nuclear Cluster, which supports the industry, expects new nuclear power plants to grow out of the Republican campaign focus on economic growth and energy security. Nuclear plants are under construction in South Carolina and Georgia. Duke Energy expects to receive a federal license by 2017 for a new plant near Gaffney, S.C., but has not decided whether to build it.
Nuclear power is a domestic energy source that “engages highly technical manufacturing and trade that appeals to the middle class – bringing jobs back,” Little said.
North Carolina is also the nation’s second-largest solar energy state, largely because of solar farms built by Duke and others. The sector is driven by the state’s 2007 renewable-energy mandate that, despite attacks by conservative legislators, remains in place.
Labor: New overtime rules likely here to stay
Businesses shouldn’t look for changes anytime soon to new federal overtime rules enacted by the Obama administration that will raise some workers’ salaries starting Dec. 1.
These new rules expand the category of workers eligible for overtime pay. Currently, salaried workers making at least $23,660 a year aren’t eligible for overtime pay. That threshold changes to $47,476 under these new U.S. Labor Department regulations approved in May.
That’s a jump in the weekly salary from $455 to $913 per week. Up to 4.2 million workers nationally – including 156,000 in North Carolina – will either see new overtime protections to their 40-hour work week, or get a salary hike.
Some businesses – particularly smaller companies and those in the food-service and retail sectors – raised worries that the change would be too expensive to their budgets.
As for Trump, “one thing we do know is he went on record saying he was not in favor of the legislation,” said Kenny Colbert, president of The Employers Association, which provides human resources and training services to about 960 Charlotte-area companies.
“But obviously the law is going to come into effect on Dec. 1, and it’s very difficult to repeal a law once it’s in place. I’m not saying it’s not going to happen…(but) it’s very rare that they sign legislation day one.”
If Trump’s administration does repeal the regulation, look for talk of resetting salaries to a “more business-friendly number,” Colbert said - more along the lines of a $600-$700 weekly range.
A federal lawsuit could stop or delay the new overtime rules. The consolidated suit, brought by 21 states and several dozen business groups, is scheduled for a Nov. 16 hearing.
Still, employers shouldn’t wait for the outcome of that hearing, according to attorney Kevin Dalton, partner at Fisher Phillips LLP, which handles labor and employment cases.
“Nothing might change, and ... you might put yourself in a situation where you won’t have time to make the appropriate adjustments,” Dalton said.
“Don’t speculate at this point that you don’t have to comply with these requirements.”
Staff writers Bruce Henderson, Celeste Smith and Katherine Peralta contributed.