US Economy

Protectionist, nationalist rhetoric not beneficial for global companies, Deere CEO says

Deere & Co. CEO on Trump's infrastructure plan and tax reform

Recurring elements of President Donald Trump's rhetoric are worrisome for Deere, CEO and Chairman Samuel Allen told CNBC.

"I think, without a doubt, any form of protectionism or nationalism, on the whole, is not beneficial for a company like ours, any global company," Allen said on "Squawk Alley."

He said, however, "We will adjust. We will have to adjust, but it takes time for a manufacturer to adjust. It's much more efficient if we can have open free trade, understandably fair trade, but free trade."

In an effort to make trade more fair, the House has floated something called a "border adjusted" tax, which would incentivize domestic manufacturing by essentially subsidizing exports. Conversely, it would also slap a 20 percent tax on imports for corporations.

The proposed tax would help Deere, Allen said, as the company is a net exporter. He said however, that the company is "very concerned" about the proposal's potential impact on its farmer customers.

"If, as a result of the adjustment tax, it has an unintended consequence of causing countries like China and Mexico to buy their ag commodities from other countries, that would be negative for U.S. farmers that do a lot of exporting to China, Canada and Mexico," Allen said.

Allen, chairman of the U.S. Council on Competitiveness, said that an infrastructure bill would be positive for his company and others in the industry.

Transportation Secretary Elaine Chao said Wednesday that the Trump administration will unveil a $1 trillion infrastructure plan later this year — a timeline that is much sooner than many expected. Chao, however, did not provide details as to how the plan would be funded.

Expectations for greater infrastructure spending have pushed Deere shares more than 24 percent higher since the election, outperforming the S&P 500's 11 percent gain over the same period.

Allen told CNBC that he's encouraged by Chao's revelation, as people in his industry were not expecting an infrastructure plan until 2018. While infrastructure stands to gain the most bipartisan support, the Deere CEO said it's going to be a while before such a plan could impact the marketplace.

"There's no such thing as shovel ready. I would expect that it will be at least 18 months down the road once it passes and is funded that we'll really start seeing the stimulative effect. But it would be a very long-term-type effect," Allen said.