Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Americans Will Pay For Trump’s “America First” Plan

Politics / US Politics Feb 14, 2017 - 09:05 AM GMT

By: John_Mauldin

Politics

Jared Dillian says the American consumer will pay for Trump’s “America First” plan.

In a recent video interview with Mauldin Economics, Jared Dillian notes that Trump’s new “America First” trade policy is anti-free trade. Plus, given the Republican Party has been the champion of free trade for decades, Trump’s new trade policy does not sit well with many in the party.


Dillian also says that Trump’s trade policies “will benefit certain people at the expense of other people; [it] will benefit workers and producers at the expense of consumers.” As an example, Dillian notes that US auto makers are now making “uneconomic decisions to benefit American workers” (moving auto plants back to US) because of pressure from Trump.

Making cars in the US is more expensive than making cars in Mexico. Therefore, making cars in the US means Americans will have to pay higher prices for cars.

Getting a grip on Trump’s border adjustment tax

As Dillian points out, the main reason a “border adjustment tax” (BAT) is so popular among politicians is that it is not a tariff. A BAT taxes the full value of a product made by a US firm abroad, thus encouraging producers to make products in the US.

With BAT, companies that make products in the US and sell them abroad (exports) may deduct the cost of making the product and only pay tax on the net profits.

The key thing to keep in mind is that a border adjustment tax will lead to higher costs for many consumer items. The overall impact of a BAT is twofold: imports cost more (higher prices) and exports cost less (more sales for US exporters).

The retail and the apparel industries will be hit the hardest

There is virtually no garment industry left in the US, so moving manufacturing back to the high-cost US from low-cost Thailand and China will lead to higher prices for apparel. Higher prices mean fewer sales for apparel firms and retailers. This would be a major blow to both of these struggling sectors.

Dillian also notes that getting a BAT passed by Congress is not a “slam dunk.” Given that the retail and apparel industries would be the hardest hit, you can be sure they will fight tooth and nail against it.

Major US exporters, however, are licking their chops at the thought of a BAT regime. This is because their overall tax burden would drop.

Finally, Dillian warns that if Trump can’t get Congress to pass his BAT proposal, it is very likely he will resort to tariffs by decree. While the president has the power to levy tariffs, Dillian argues this kind of protectionism is close to a worst-case scenario, pointing out that tariffs always lead to less trade, not more.

Watch the full interview with Jared Dillian (7:54) below.

Get Thought-Provoking Contrarian Insights from Jared Dillian

Meet Jared Dillian, former Wall Street trader, fearless contrarian, and maybe the most original investment analyst and writer today. His weekly newsletter, The 10th Man, will not just make you a better investor—it’s also truly addictive. Get it free in your inbox every Thursday.

John Mauldin Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in