A Trump effect?
UND experts weigh pros and cons of GOP presidency on North Dakota’s economic outlook
When the Electoral College deemed businessman Donald Trump the next president of the United States in the early morning hours of Nov. 9, social media sites and watch parties erupted with equal parts joy and panic.
But mixed within the emotions was a feeling of uncertainty. The biggest questions: What would a Trump presidency look like? And here in North Dakota, what could this mean for the state’s economy?
David Flynn, chair of UND’s Department of Economics & Finance, says a national feeling of uneasiness was apparent the moment it became clear Trump could be victorious. That’s when S&P futures tanked on election night.
“I think the market anticipated a Clinton victory, so a Trump victory was an unexpected event which forced them to rethink what they were doing,” Flynn said. “Markets hate uncertainty, so anytime these kinds of events start to reveal themselves, you start to get wild swings in one direction or the other.”
Now that the markets have surged back, the next uncertainty is the appointment of Trump’s cabinet. Political analysts have placed Oklahoma oil mogul Harold Hamm at the top of the list of potential choices for secretary of energy.
Although Hamm, CEO of Continental Resources and the namesake for UND’s School of Geology & Geological Engineering hasn’t spoken publicly about whether he would take on the role, UND Political Science Professor Mark Jendrysik speculates that he could turn it down.
“I’m not sure Mr. Hamm would want to go around and do the mundane things of running that,” Jendrysik said. “It wouldn’t surprise me if he gets nominated, but it certainly wouldn’t surprise me if he decided not to accept. It may not be what he’s most interested in. The production of energy is his thing.”
Whether or not Hamm joins the Trump administration, changes are likely in the energy sector.
Jendrysik says a Republican presidency will be friendlier toward energy exploration and production than the previous administration. That could mean significant impacts for the economic outlook of energy-rich states such as North Dakota. By extension, it also could affect major research institutions in the state, such as UND’s Energy & Environmental Research Center (EERC) and the Department of Petroleum Engineering within the College of Engineering & Mines (COE), which help the energy industry understand the state’s geological makeup, extract more energy from it and reduce environmental impacts.
“Regulations on coal-fired power plants that the Obama Administration proposed, would be watered down under the upcoming administration,” Jendrysik said. “That may help North Dakota because we have plants that burn lignite. So that may be helpful in the sense of keeping the plants going longer.”
However, Flynn notes that the success of North Dakota’s fossil fuel companies doesn’t lie solely on regulations.
“If you reduce regulatory restrictions, sure, you’re going to lower the cost of operating,” Flynn said. “But at the end of the day, it’s still about revenue and it’s still about what the price of a barrel of oil is going to be. Right now, global factors are trying to raise the price of oil, but we’ve seen the price of oil go down again. There’s still a big part of that puzzle that’s not within anybody’s control, and that really matters a lot.”
Jendrysik says UND’s COE and the EERC could theoretically see additional support, especially for coal and carbon-capture research, but he made it clear that nothing is guaranteed. Flynn echoed this sentiment but also argued a potential negative outcome for the University.
“There’s a substantial amount of research that shows higher regulations encourage innovation and creativity because you’re trying to get around them,” Flynn explained. “So, that’s a double-edged sword: as you reduce the amount of regulation, you may, at some level, make it financially less viable to do research in innovative techniques to get around certain things.”
Trump’s pledge to renegotiate or withdraw from the North American Free Trade Agreement (NAFTA) within 200 days of taking office — as well as his general trade issues with overseas nations — could also be a concern for the agriculture sector, North Dakota’s other major industry.
“In general, the farm side of things is more favorable to free trade, more favorable to allowing American farm products free access all over the world,” Jendrysik said. “So some kind of trade war with China or renegotiation of NAFTA would certainly complicate life for the agricultural sector in ways that people probably haven’t thought through.”
Flynn says with a pro-business president, the pro-business climate of North Dakota could be enhanced. And with two-thirds of the state’s congressional delegation being Republican, there may be more opportunities to work more closely with a future Trump administration.
“The word is uncertainty,” Flynn said. “And there’s uncertainty with any new presidency. But in the case of President-elect Trump, it’s a little bit higher, because there’s uncertainty about what his policies actually will be and whether or not the Republican-controlled Congress will go along.”
