Every year, the consulting firm AT Kearney surveys executives for their opinions on where to invest. In mid- 2016, the United States topped the Foreign Direct Investment (FDI) Confidence Index for the fourth year in a row. AT Kearney found that global business executives are more optimistic about the economic outlook for the United States than for any other country. A significant percentage of business executives said, however, that they would reduce investment into the United States “if Americans elect a populist (far-left or far-right) president in the November election.”

In November 2016, Americans elected a self-proclaimed populist president, Donald J. Trump, but the markets did not respond with fear. In the month since the election, global markets have generally risen. Analysts claim investors see opportunities in the President-elect’s plan to build infrastructure. Market actors, however, crave predictability, transparent regulatory processes, evenhandedness, and norms underpinning the rule of law. Some of the President- elect’s recent actions signal a decline in the rule of law. As a result of this signaling, foreign and domestic investment in the US is likely to decline.

In countries with strong rule of law, government officials and agents, as well as individuals and private entities, are held to account. Laws and regulations are clear, publicized, stable, just, applied evenly, and protect fundamental rights. Policymakers enact, administer, and enforce the laws and regulations in an accessible, fair, and efficient manner. The court system provides a timely and even-handed approach to justice. Market actors know that although policies may change, these norms of good governance will persist. Thus, in the US, corporate investors presume that they will not be discriminated against because they hire Muslims, favor climate change accommodation, or choose to move their operations overseas.

President Trump has used his words and actions in ways that undermine confidence that companies and individuals will be treated in a transparent, equitable, and accountable manner. Trump’s approach to trade policy illuminates how little he values evenhandedness and transparency, which are key norms underpinning the rule of law. In early December, Trump stressed that rather than applying the same tariffs to all companies, he would use punitive tariffs to punish companies that source overseas.

First, under the Constitution, trade policymaking is a shared responsibility between the Executive and legislative branches. Congress has not indicated that it wants to single out specific companies for their production and employment decision. Hence, this approach is undemocratic, undermines longstanding US mores of evenhandedness, and violates trade commitments under the WTO, the international trade organization created by the US to discipline such practices. While it is laudable that the President elect wants to preserve jobs, executives may read into his action that the Trump Administration will act in an arbitrary or discriminatory manner.

Secondly, Trump-affiliated companies are not modeling positive behavior. Trump subsidiaries and licensees make eye­glasses, perfume, cuff links and suits in Bangladesh, China, Honduras and other lower-wage countries, not in the USA. Executives may read into his actions that he is above the law and not fully committed to his own policies.

In a similar manner, Trump’s refusal to put his family’s assets in a blind trust or to be fully transparent about his taxes or investments signals the wrong message about the rule of law. Without a blind trust, he risks conflicts of interest and raises questions about whether Executive Branch decisions are made in the public interest or the interest of his firm or cronies. Executives may read into this behavior that it is ok to have such conflicts of interest. Moreover, the United States may find it hard to promote good governance overseas when our new president’s approach to governance is opaque, unpredictable, and less accountable. Trump signals that his interests take precedence over the public’s right to know or the interests of other investors, who will not have the same access he and his family have to make good market decisions. Here again, his actions convey that the US will not adhere to the same levels of transparency, accountability and evenhandedness investors have long expected.

Governance is not only about policy choices. It is also about signaling. President-elect Trump has indicated that he (and hence the US) are less committed to longstanding mores of good governance such as transparency, accountability and evenhandedness. Investors may send a signal in return by reducing their investments in US markets.

Susan Ariel Aaronson is Research Professor and Cross Disciplinary Fellow at the George Washington University, where she teaches corruption and good governance.

Disclaimer: The opinions expressed by the guest blogger and those providing comments are theirs alone and do not reflect the opinions of the Sunlight Foundation.