Perhaps if POTUS is able to get US companies to relocate funds held in offshore banks back to the US with limited tax penalties, domestic investment could pick up, unfortunately, the countries where those funds are presently domiciled are probably going to kick up a fuss.
Make a fuss about what ? If that money is there it's because they're fiscal paradises.
Much cheaper for US companies to issue bonds and keep the funds abroad that virtually any tax present can be.
It wouldn’t surprise me if they are using tariffs as a cover for a pre-existing plan. Surely making motorcycles in India and Brazil is a whole lot cheaper, tariffs or no tariffs.
for sure, so far this is a trade spat that could be over in a few weeks, no one makes 20 years+ decisions based on that.
The three high profile goods hit by EU tariffs are Harley Davidsons motorbikes, Bourbon and jeans. While I understand the rationale behind the first two - built or produced in Trump leaning US states - I struggle with jeans. Is a significant number of jeans still produced in the US? My hunch has always been that jeans are produced in places like Banglasdesh, Pakistan etc. and this "American blue jeans" label is merely a marketing exercise.
There are still a dozen or so Jeans brands that manufacture in the US. By value that is fairly labor intensive business, so tariffs on those has a fairly high employment effect.
Your last remark is a general truth and immediately also the main weakness of Mr. Trump's economic strategy.
As a real businessman he's obsessed with the VALUE of the trade deficit, but he forgets one thing: PRODUCTIVITY.
Due to a decade long underinvestment in the US economy, which in turn is due to both the obsession of shareholders with maximizing immediate return as well as the abundance of relatively cheap labor, the US economy now needs significantly more manhours to produce a same value of goods than the EU's economy does, so when Mr. Trump want to rebalance the trade deficit the US runs with the EU, guess who'll lose in the end? Indeed: the American worker.
Think of it this way:
the US kicks out all of company's A imports to the US, valued at X amount of money: 1.000 jobs lost in the EU.
The EU retaliates by kicking out goods for the same value imported from the US: 1.100 people in the US loose their job.
If the EU choses wisely -as it seems to be doing- it can even maximize damage further and hurt 1.200 or more jobs!
No wonder you see US companies blink first. Wonder how long it will take for Mr. Trump to start hitting out to corporate America for not sticking with him long enough...
The problem the USA has today is NOT that is has unfavorable trade deals with basically everybody in the whole wide world; its economy main problem today is a too low productivity which makes it uncompetitive!
The US should stimulate shareholders to invest much more in the long term efficiency of their companies, rather than reward them for their shortsightedness and their obsession with improving the next financial report further (and the subsequent bonus for the management, dividend for the shareholder), while it should start to incrementally introduce some form of minimum wage to further stimulate investment in further efficiency gains, combined with an overhaul of the education system to make sure the people who come out of schools and don't make it to university can still take on jobs which require a minimum of knowledge, understanding and skills, because the days you actually needed people doing nothing but packing stuff in are long over everywhere but in the US: however, they'll need to know how to operate machines doing the packing for them!
Never wondered why within the EU -which is much more than just a free trade zone like NAFTA- countries like Germany for instance can successfully compete even on manufacturing with cheap labour places like Bulgaria?
Last edited by sabenapilot
on Tue Jun 26, 2018 7:50 am, edited 1 time in total.