So, you know how Great Britain left the EU and their entire country was forced into economic turmoil? I have a strong feeling that could happen in the Unites States. Why? Two words, Donald Trump. The implications of his proposed policy surrounding global trade could be detrimental to American companies. The three points he outlines at the end of his positions page are not only unreasonable, but are unattainable due to current trade relations with China and the current political environment.
1. Lowering the corporate tax rate is highly unlikely in the current American political environment because a major focus of the Democrats has been to increase taxes on large corporations.
2. 20 trillion dollars of debt will not be solved in his four years as president, and as a result he will not be able to improve the US's bargaining position with China. Current US GDP is 18 trillion.
3. Military tensions in the waters around China are already tense and an increase in military presence is likely to create more hostility.
Among all inquiry into his inarticulate proposals lacking any detail whatsoever lies one major concern: his proposal to force international companies to bring their production of labor intensive products back to the Unites States.
In order to paint a clear picture of how this type of policy will affect every single American in the country, the spotlight can be turned on to one of the United States' most successful companies, Apple Inc. Trump has made many promises to force companies to move entire production divisions of their businesses to American soil when campaigning in states where companies have outsourced their labor to foreign countries. He has named companies such as Apple and Ford Motor.
Projecting just how this policy will effect the ability for these companies to survive such a move proves difficult, but Forbes provided a thorough perspective on how Apple Inc would be affected, and it does not look good for Apple. Who will flip the bill if these companies begin to pay 35% compared to 2% in taxes? Who will take on the extra cost that goes into an iPhone and other products when Apple is forced to pay their workers almost five times more than they currently pay due to the currency difference? The answer is the American consumer.
Apple will do one of two things to make up for this increased cost. They can raise their prices on their products, or they can keep the prices constant.
1. If the prices of Apple products are raised, less people will buy these products, sales will drop, and Apple could struggle to maintain projected profitability. Their investors would be deeply concerned about future earnings because of higher prices and stock market performance could be compromised.
2. If they do not raise their prices, they risk losing huge portions of their company's net worth on the stock market because they will begin to risk losing earnings as a result of the increased cost.
Most likely, they will raise prices to avoid a falling stock price. Either way, both the American consumer and Apple lose. Not only will Americans start paying more for a phone which has become the technological standard throughout the country, but anyone with stock in Apple has the potential to take heavy losses on their investment. Anyone with a diversified retirement plan will lose.
Imagine, just for a second, if this scenario were to play out for all of the international companies who use cheap foreign labor to keep the prices of their goods down. The stock market becomes more vulnerable, and companies will be forced to raise prices to compensate for increasing costs.
The potential for companies being forced to increase the prices for their goods gives rise to a major concern that could completely destroy the US economy, and that's inflation (a general increase in prices and fall in the purchasing value of money). American consumers will begin to pay more for the goods they need which will make it difficult for companies essential to the US economy to thrive. Donald Trump's policy toward international business is the perfect recipe for inflation and at the very least economic uncertainty.
There is a tendency for voters to focus on issues that may not actually matter if the US economy fails. Voters must focus on the issues that have the potential to effect every single citizen, and that requires the consideration of the United States on a global scale.
Further reading here:
Five ways Donald Trump benefits from the globalization he says he hates
