Having been elected as the 45th President of the United States, Donald Trump is best known thanks to the rhetoric of protectionism. He has repeatedly threatened to implement Border Tax to Mexico and China, even specifically designate certain multinational companies as targets of the protectionist tax imposition. What exactly is meant by protectionism Trump? How will it affect the world? Or is it just market fears unfounded? Check out the full review below.
Protectionism idea Trump
What is protectionism?
Protectionism is the economic policy direction that tends to curb the trade flows between countries in the way set import duties, import quotas, as well as various other regulations in order to achieve a trade balance surplus. Protectionist policies intended to protect local companies from competitors abroad, and to encourage job creation as much as possible to the citizen.
To meet that goal, the perpetrators of protectionism could provide subsidies and tax deductions for domestic firms. Instead, taxes such as customs import large amounts levied on goods from abroad. In connection with it, since some time ago, connoted protectionist policies in line with the anti-globalization movement.
Protectionist doctrine contrary to the understanding of free trade (Free Trade), in which the government seeks to reduce the obstacles of international trade. Free Trade growing understanding that the wealth of a country can be obtained with the common progress and not to prevent competition. Expectations, competition will encourage the emergence of better products and more competitive for consumers, and encourage innovation for the progress of civilization.
Anything rhetoric Protectionism Trump?
Specifically, the rhetoric of protectionism Trump digaungkannya since I was in a period before the presidential campaign covering many aspects, not only the economy, and become the core of the slogan "America First". Among them:
Deporting illegal immigrants and build a border fence with Mexico.
Applying tighter immigration rules and re-evaluate immigrants who have entered the US, where it alarmed the IT companies in Silicon Valley because the majority of their employees are immigrants.
Prohibit outsourcing jobs to overseas.
Canceling the US growing participation in the Trans-Pacific Partnership (already officially done).
Renegotiate NAFTA with Mexico and Canada.
Cut the corporate tax from 35% to 15%.
Planning a Holiday Tax (similar to the Tax Amnesty Indonesian government declared some time ago) to encourage corporations to bring home funds invested abroad.
Demands China, Japan, and Europe for alleged currency manipulation.
Applying Border Tax.
Among all the rhetoric of protectionism that has been leveled, the new one that has been completely implemented, while the rest is still a matter of debate. Donald Trump's intention to tighten immigration also received strong opposition in his own country. In fact, about 100 companies of Silicon Valley today (07/02/2017) has just filed a lawsuit together to prevent it complicates the immigration rules.
However, for financial market participants, the most worrying is the last point: Border Tax. The problem is, the word means literally "Border Tax" is potentially a double-edged sword that sparked an international scale trade war.
What is a Border Tax?
Border Tax similar to import duties within the meaning of protectionism above. Namely, the tax on products imported from other countries, similar products made in order to protect local companies. However, Border Tax was intended by Trump seems to also include products made by US companies abroad. Thus, the Border Tax also intended as a "penalty" for companies that build factories in foreign countries.
One of them, Trump has threatened to apply a 35% tax on automotive products made of GM and Toyota in Mexico. The problem, of such protectionist measures prohibited by the agreement North American Free Trade Agreement (NAFTA), so he must first seek to renegotiate or withdraw the US from the trade pact.
Trump protectionist measures is long triggered. As quoted by Bloomberg, in his book published in 2011, he urged the enactment of tax of 20% on any country that is exporting goods to the US. In one campaign speech, he also suggested the implementation of a 45% tax on imported goods from China and 35% on goods from Mexico.
Is Trump Really Have Power To Implement Border Tax?
Yes. Based on the Trade Act of 1974, the US president has the unilateral authority to change trade policy, including divert toward protectionism. Ar