Tax Cuts vs. Tariff: Here’s How Trump’s Policies Affect Corporate America
A few months ago, the US giant companies lauded the President for the major tax-cut law. It enables the companies to pay for a lower corporate tax, earning more money and profit in the process. The business sector can use this excess cash flow to fund the expansion of their business or to invest in innovation and R&D.
However, it seems that Trump became a villain in corporate America when he imposed a tariff on steel and metals. Not only it affects the metal industry, but it also directly affects other companies who are using steel and metals for their products. Let us uncover how corporate America is likely to suffer the burden of Trump’s changing policies.
The Tax-Cut Law
One of Trump’s most controversial policies was the implementation of the Republican Tax law. The ones who benefited the most from this policy were big companies like Walmart, AT&T, Home Depot, Apple, etc. These giant companies were finally able to give bonuses to their employees because of the projected profit they were able to save by lowering the corporate taxes.
Ken Shea, a Bloomberg Intelligence analyst, even projected that giant companies were able to see an astounding 7% increase in their net income profit due to the 21% tax cut. There goes the saying that the rich become richer thanks to Trump’s corporate tax cut.
The Impending Trade Wars
Last month, Trump announced to the world that his administration is set to impose a 25% tariff on import metals. This latest move of the President caused a stir in the global economy as world leaders call for Trump to reconsider its decision. They warned the U.S. President of an impending trade war if he continues imposing the tariff. Even the European Union warned Trump of retaliation to US auto bikes and other iconic brands like Levi’s Jeans, and Kentucky Bourbon if this continues.The European commissioner also stated how the high importation tariff affects the American and European trade market.
But, President Trump remains unfazed and said that he loves trade wars. He reiterated that it was high time America should impose a higher import tariff on metals to protect the country’s steel economy in order to be able to compete in the international trade thanks to these measures. In the end, it will put the country’s interest first before others, Trump says.
Changing Policies Bad for the US Economy
The business’ sector fears President Trump’s importation tariff and sees it as a real threat to corporate America. They even go as far as claiming that it’s the perfect recipe to shrink the US Economy. The giant beverage manufacturer Coca-Cola, among others, would need to spend around $500 million to produce their aluminum tin cans because of the impending tariff. BI’s Shea also stated that Brewers may face paying an extra $348 million cost for the said higher metal prices. This means that the imposed tariff would pretty much offset the benefits of the tax-cut law for this sector of the economy.
Many companies would have to pay a hefty amount of importation and exportation fees for trading overseas. Because of this uncertainty, the steel and market industry’s index point plummeted in the US stock market as investors started pulling out their investments.
High Unemployment and Inflation Rates
In order to recuperate from the major loss, most companies will have to increase the prices of their products and services. LG Electronics, for example, increased their product’s prices up to $50. They started implementing the new price rate on their washing machines last January due to the imposed tariff.
Not only the consumers suffer from high inflation rates, but it also diminishes their purchasing and spending power. Moreover, companies may also start downsizing their operations to reduce their cost. The downsizing puts millions of American workers at stake. This could shrink America’s global workforce and affect the country’s booming economy in the process.
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