Sunday, January 15, 2017

Trump Border Tax a Repeat of the Mistakes Made in the Great Depression?

While Trump's school yard bravado might play well to his core supporters, the rest of the world isn't that naive. The Trump Administration's border tax better be 'flexible', a floating percentage tied to currency fluctuations, or, better yet, quietly forgotten, or Americans could find themselves paying higher prices on good ranging from cars, car parts, consumer electronics and durables, and, most importantly, food. As I have said before, Trump's mostly likely crisis will come in the form of trade wars spawned by an imploding European economy and an unexpected and sharp rise in the US dollar. Rising protectionism during the early stages of the Great Depression was setup by economic deterioration in Europe and a rising dollar as capital fled to the relative safety of the United States. The rising dollar, a trend that reduced the competitiveness of US relative to foreign goods, created the trade deficit. Politicians thought this deficit could be effectively managed by tariffs and border taxes. Sound familiar?

Headline: Mexico will 'immediately' respond to any U.S. border tax: minister

Mexico must be ready to respond immediately with its own tax measures if the incoming administration of President-elect Donald Trump imposes a border tax, the economy minister said on Friday, warning such protectionism may trigger a global recession.

Trump, who takes office on Jan. 20, has promised a "major border tax" on companies that shift jobs outside the United States, and such a measure could hobble Mexico's exports to its top trading partner.

"It is clear we need to be prepared to immediately neutralize the impact of such a measure," Economy Minister Ildefonso Guajardo said in an interview on Mexican television.



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