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Handling America’s Brexit

The many leaders in business and government worldwide whose scenarios for 2017 did not include this scenario will now confront reality and adapt. Where to begin? Think of the job in three categories:

-Adapting to massive policy uncertainty. Did Trump mean it when he said he might “renegotiate” – that is, default on – U.S. Treasury debt? That he would deploy a huge deportation force? That he would renege on America’s obligations under the NATO treaty and that he would encourage South Korea and Japan to develop nuclear weapons? It’s hard to say because he was apparently making up policy positions as he spoke. He has been consistent on only two points and is clearly on the hook to his supporters to deliver on them: imposing severe restrictions on immigration, especially by Mexicans and Muslims, including building a southern border wall; and reducing imports while also punishing U.S. companies that move operations abroad. Whether either initiative could win congressional approval is far from certain.

Which raises a larger uncertainty. Republicans will control the White House and both houses of Congress, but they aren’t even remotely united. Almost no senators endorsed Trump, and few representatives did; House Speaker Paul Ryan obviously detests Trump and opposes his positions on immigration, trade, taxes, and other issues. Or maybe Ryan won’t be speaker in the new Congress – another uncertainty. Federal policy, which would have been highly predictable (though unpopular among business leaders) under Clinton, has just become a giant mystery. Pay close attention to Trump’s early announcements of appointees, a leading indicator of where he may be going.

-Adapting to second- and third-order effects. For many leaders, the ways in which others respond to a Trump presidency may be more significant than Trump’s own actions. What is Xi Jinping thinking as he contemplates a U.S. president who has virtually promised a trade war with China, and how will he respond preemptively? How about Vladimir Putin, quite possibly the happiest man in the world today? Stock markets plunged on the election news almost everywhere, except Russia. Will illegal immigrants, on whom U.S. agriculture and some other industries rely, flee the country? Leaders need to anticipate how others will behave and then go another level deeper and anticipate third-order effects. It’s time for 3-D chess.

-Adapting to the broader phenomenon. We always knew there were plenty of Americans who felt victimized by the globalizing economy, threatened by a more diverse, less white populace, affronted by a changing culture, especially with regard to sexual orientation, gender, and race. What we didn’t know until now was how many such people there are and how powerfully angry they are. Very likely they didn’t realize it themselves. Now they know and the world knows, and the national conversation on nearly everything will change. Angry rejection of established authority is the new zeitgeist. Anyone who communicates with the American public needs a new strategy.

Many leaders have now learned the hard way that just because something is unthinkable doesn’t mean they needn’t think about it. Let’s hope they remember that lesson. For all we know, more unthinkable news could be on the way.

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What We’re Reading Today

President-elect Donald Trump
Trump won by defeating Clinton in swing states long considered leaning Democrat, including Wisconsin, North Carolina, and Pennsylvania. He will be the oldest president ever elected to a first term and the first ever elected without political or military experience. Washington Post

Hillary Clinton calls to concede
She made the call early this morning, shortly after her campaign told supporters Clinton would not address them because results in a number of states were still uncertain. Fortune

Republicans maintain control of Congress
The outpouring of support for Trump buoyed a number of GOP senate candidates, notably Ron Johnson of Wisconsin, Richard Burr of North Carolina, and Patrick Toomey of Pennsylvania. All surged late to win their respective races. Continued Republican control of the House was not in doubt.  NYT

Brexit take two  
Trump will face challenges building his cabinet and easing a split U.S. following a particularly divisive election. Fortune

Mexico scrambles to react
With Trump campaigning on a vow to renegotiate the North American Free Trade Agreement and build a border wall, Mexican officials and business leaders are preparing to implement plans they hoped never to use. The Mexican peso fell sharply. WSJ

Trump’s foreign policy plans
Trump’s America-first policy positions concern many world leaders. Relations with Russia will probably become friendlier. Washington Post

Obama congratulates Trump
The president called the president-elect this morning and invited Trump to the White House on Thursday to discuss transition plans. CNN

Other Election Developments

Four states raise the minimum wage
Maine, Arizona, and Colorado voted to raise the minimum wage to $12 an hour by 2020. Washington approved a raise to $13.50. NPR

Three states legalize marijuana
California, Massachusetts, and Nevada voted to legalize recreational use, which will now be permitted in seven states and Washington, D.C. The votes increase pressure on the federal government to scale back restrictions on marijuana.  NYT

Thinking of moving to Canada?
It’s not so simple. You need family there, or a special skill the country wants, or a grant of political asylum. It’s easier for professionals such as doctors and teachers. Fortune

Fortune Reads and Videos

Here’s what a Donald Trump cabinet may look like
Newt Gingrich and Rudy Giuliani are among the names being floated. Fortune

A pundit who got it right
In February, Current Affairs editor Nathan Robinson wrote an article titled “Unless the Democrats Run Sanders, a Trump Nomination Means a Trump Presidency,” arguing that Hillary Clinton couldn’t beat Trump in this political climate. Fortune

Vladimir Putin congratulates Trump
The Russian president “has expressed confidence that the dialogue between Moscow and Washington, in keeping with each other’s views, meets the interests of both Russia and the US,” writes Russia Today. Fortune

Why did Trump win?
It arguably came down to the economy, particularly manufacturing. Fortune

Quote of the Day

“Now it’s time for America to bind the wounds of division; have to get together. To all Republicans and Democrats and independents across this nation, I say it is time for us to come together as one united people. It’s time. I pledge to every citizen of our land that I will be president for all Americans, and this is so important to me.” — President-elect Donald Trump  Fortune

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Produced by Ryan Derousseau