Doing business in the US: Between uncertainty and opportunity
The US still offers opportunities for our Belgian entrepreneurs. But there is no doubt that we are in a new era. Professor David Criekemans outlined the broader narrative, in which the geoeconomic cannot be separated from the geopolitical and the geostrategic.
To mark Donald Trump's first 100 days as the new president of the United States, earlier this month we organised an evening focusing on the theme ‘Doing business in the US’. As well as the macroeconomic outline presented by Laurent Convent, Financial Analyst at KBC, and the inspiring testimonial by Michiel Allaerts, CFO at Ravago, we were given a contextual framing and analysis by Professor David Criekemans, a political scientist at the University of Antwerp (UAntwerp).
In response to the question of whether there are opportunities for Belgian entrepreneurs in the new America, the answer turned out to be simple. ‘Yes, in fact there are plenty'. But to frame those opportunities correctly, you first have to zoom out, David Criekemans said, because, ‘we are clearly in a new era’.
The first observation is that the ‘American dream’ is over. And that, according to Professor Criekemans, has to do with the change in the country’s economic fabric and the way numerous generations of politicians have dealt with that change. By way of illustration, he looked at the recent history of the ‘Rust Belt States': states like Pennsylvania, Michigan, Illinois, and so on, which symbolise the old, polluting industries (automotive industry, mining, steel). Since the 1980s-90s, heavy industry in these states has been dismantled and moved to places where these economic activities could be developed more cheaply and without too much concern for environmental issues.
The second observation is that we are in a new era today, with Donald Trump now trying to do the opposite of what President Richard Nixon and Secretary of State Henry Kissinger set in motion five decades ago. Kissinger saw tensions between 'Red China' and the Soviet Union in 1972. 'And what did Nixon and Kissinger do? They initiated a policy aimed at cultivating better relations with China. Taiwan was expelled from the UN Security Council, China replaced it and the US and China began a period of economic cooperation. And you can see straight away that I am making a rather interesting leap here, because although I am talking about geostrategy and geopolitics, I think that is also linked to geoeconomics.'
Delocalisation and cheap labour
A process of delocalisation began, with industries being moved to regions with much cheaper labour; this continued in the 1990s in the form of free trade agreements. People who lived and worked in the Rust Belt saw their future implode. 'That is the structural crisis into which those Rust Belt States have fallen, and to me that is highly symbolic. Hilary Clinton used the term ‘basket of deplorables’ in 2016 to describe people who were willing to vote for Trump. This was also the ultimate moment when Democrats decided to focus on new topics such as advanced technology and renewable energy,... and in the process forgot about and lost much of their audience. They were no longer interested in the Rust Belt States. And then along came Donald Trump, who saw a new electorate in these states, and presented himself as the candidate who understood them and was on their side. The Republican party now represents these people in principle (whether their interests are really defended is another story). So we are really witnessing a broader phenomenon.'
However, the decoupling from China continues, and Professor Criekemans made a neat link to the present day, arguing that what Trump is trying to do is actually a ‘Reverse Kissinger’, in that he wants to make ‘nice deals with Russia because then we can separate them from China.’ It’s the same narrative, but in precisely the opposite direction.
We also see this disconnect reflected in the economic model, because basically Donald Trump wants to transform and reorganise the whole of the economy, according to Criekemans. Because for Trump, the US must remain the leader in a number of technology sectors and China must not become the biggest. And that is the bigger picture through which he demonstrates that geopolitics, geoeconomics and geostrategy are all connected.
What does this new situation mean for those looking to do business in the US?
Professor Criekemans: 'A lot depends on the environmental variables; what kind of a world will we end up in, and what will the tariffs ultimately be? Those already operating in the US market will get a competitive edge with better terms. One thing that is new is the rush for factory sites, despite all the uncertainty. One of the most important things we have learnt is the importance of good quality and good service; if you can deliver those, customers will call you. And those are areas where we excel in our region. It’s an important lesson.'
Small countries, big achievements
Criekemans sees a lot of sectors that come onto the radar in this regard. 'One important cluster, for example, is the health and pharmaceutical sector, or life sciences. Think of companies like Imec or ASML in the Netherlands; they clearly show that we can do it and that we are perfectly capable of transforming our so-called weakness as small countries into a strength. But we can only do that if we work at it systematically. Imec is a great example; it started with seven researchers, received support from the Flemish government and is now a global player with an annual turnover of more than a billion euros. Everyone goes to them to test out tomorrow's new technology, so the technology narrative is definitely possible.'
The energy sector is another example. 'That's what we Europeans have been working on: renewable technology and all the IT associated with it. And that’s going to be rolled out further, with or without Donald Trump. Or take another example: bringing together supply and demand. There are lots of technological solutions for that too: building insulation, for example, a field where we lead the world; or the expertise of our petrochemical sector as regards energy efficiency; our know-how regarding ports... The list of possibilities is getting longer and longer, but the central idea is to bring quality, to be the stable cooperation partner, perhaps with a local presence.'
David Criekemans also thinks we can learn a lot from the Americans when it comes to energy. It’s a theme he explores at length in his newly published book Hyperrealism. Europe in a new geopolitical era. 'What is their model? Cheap energy based on deregulation, and betting on everything. Should we do the same? That’s a political choice, but I do think it’s important for our competitiveness to focus on cheaper energy.'
He cited the example of Bill Gates, who recently bought two nuclear power plants to modernise and power his future data centres. And it could be that those data centres might help us find new building blocks for the chemical industry, perhaps enabling us to replace petrochemicals, or helping us find partial solutions to climate change....
In search of a new balance
But Professor Criekemans also shares some concerns, citing the Trump administration's day-by-day dismantling of the federal government. This, he said, will create instability as the government will no longer be able to efficiently address a number of socio-economic problems. So while it’s true that the US economy is resilient, we are also heading into uncertain times.
And that brings us back to Europe and Belgium. 'We need to reflect on our future relationship with the US. It’s a fantastic market, we can make money there, and we still need them in the area of security and defence. The Baltic states, for example, are having sleepless nights because of security fears. Because what if the war in Ukraine stalls, the Russian war machine keeps on rolling and Trump loses interest? There are several areas where we Europeans are not in a position to replace the US.'
'But at the same time, we are in a new era, and the paradox is that if we think about it smartly, it's also an opportunity to invest, which in time will lead to new technological developments. Should we be concerned and critical regarding AI, for example? Yes, of course we should, but these technologies are also going to give us knowledge and know-how that can be applied to other sectors where we can excel. It’s all about finding a new balance.'
Professor David Criekemans ended his analysis with a telling remark: 'Yes, there are definitely opportunities for us in the US despite the high degree of uncertainty, but ‘nature will kick in at some point’. The Trump era will pass; it is currently a major shock and it will lead to a 'reset', but it is part of a bigger narrative that has been building for several decades and will move towards some kind of new political synthesis. And from there, the US will find its way again. And we have to do the same.'
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