The Business Roundtable’s CEO Economic Outlook is at its highest level in history, and small business owners have reported their highest optimism in 35 years. But that doesn’t mean CEOs aren’t worried about potential concerns that could harm this boom period.
There’s already concern that rising gasoline prices could throttle the boom by eating into American consumers’ disposable income and offsetting the pocket-loosening effect of the federal tax cuts. What else could kill the good times? Here are 10 top CEOs concerns, loosely ranked from most severe or likely, to least so:
Trade War: President Trump said that’s exactly what he wanted to start by imposing tariffs on imported steel and aluminum and penalties on Chinese goods. Concern about retaliation immediately swept across the economy. Joshua Bolten, CEO of the Business Roundtable, warned that “missteps on important elements of Ugrowround.S. trade policy will undermine great economic progress.” But Trump quickly promised tariff exclusions to American allies and top trading partners, and China pushed back only meekly. Brembo North America, for instance, with major operations in Mexico as well as Michigan, isn’t changing its footprint. Trump “is always negotiating,” says CEO Dan Sandberg. “It’s either changes in NAFTA or something else he wants.”
Political Upheaval: Some CEOs are concerned that Republicans haven’t accomplished more of their agenda despite control of Capitol Hill and the White House. Now Democrats may wrest control of the House in November. But former CKE Restaurants CEO Andy Puzder says Democrats in Washington have allied themselves with failure of Trump’s pro-growth policies, including the tax cuts. “Progressives fear President Trump’s potential to succeed much more than they fear his potential to fail,” he says.
Presidential Self-Sabotage: By now, Trump’s habit of working at cross-purposes to his own policies and impulses is well understood. However, that could manifest in unpredictable ways. Still, says Jeff Vinik, chief of the Tampa Bay Lightning professional hockey franchise and a major investor in Tampa-area real estate, “Markets adjust. People adjust. Things change. Trump obviously is controversial, and that could be a wild card. But in the long run, I think that’s a rounding error in terms of our economic growth in general.”
Runaway Rates and Inflation: Most CEOs recognize the healthy role that moderate inflation can play in raising their prices and giving them more room for financial maneuvering. But David Heacock, CEO of FilterBuy, a Talladega, Alabama-based maker and B2B distributor of air filters, worries that “input costs rising as much as ours have already isn’t sustainable over a long period of time.” Brandon Spear is wary as well. “If the cost of money goes up, that will slow things,” says the CEO of MSTS, an Overland Park, Kansas-based financial technology provider. “It will slow down the customers we work with and impact the cost of working capital. I worry about that.”
“Deficits are going up, and infrastructure and other spending is going up. You’ve got to be cautious.” – Mike mcguire, ceo of grant thornton
Black Swan Visitation: Everyone brings up the possibility of a world-changing event disrupting economic performance. The fright caused by such a possibility is compounded by the fact that many such singularities are completely unforeseen.
Productivity Funk: This problem has dogged the U.S. economy—and been blamed for much of America’s recent stagnation. If CEOs don’t find ways to boost productivity during the current boom, such a failure could hasten its end. “There’s the lack of the right skills to fill jobs” already, notes investment firm chief James Cassel. “With AI, a lot of people will be displaced, and I’m not sure how we’ll train them for something else. Underemployment remains a big problem.”
Overconcentration of Growth: Three technology titans—Amazon, Microsoft and Netflix—powered about half of the stock market’s advance in early 2018. That’s a proxy for the unhealthy concentration of growth and prosperity in the tech sector as it relates to the economy as a whole.
Budget Deficits: The Trump tax cuts kicked the federal budget–deficit can down the road, in part with the expectation that the current boom will raise more tax receipts. But, as Grant Thornton CEO Mike McGuire puts it, “Deficits are going up, and infrastructure and other spending is going up,” he said. “You’ve got to be cautious.”
Lack of Immigration Reform: While the president has been concentrating on the economy, some CEOs maintain that he’s side-burnered one potential source of aid: solving the immigration dilemma and providing U.S. companies with more labor.
Drug Haze: Other human capital concerns stemming from America’s soft social underbelly include opioid abuse. “There are parts of the country where the opioid epidemic is so problematic that employers cannot find individuals who can pass drug tests, let alone sustain a 40-hour work week,” says Todd Thibodeaux, president and CEO of CompTIA, a tech-industry trade association.