MONEY
Money tariffs to trade in US? Let’s check together
Tariffs on goods may be a prelude to tariffs on money. What did you say? And that’s not a conspiracy theory — it’s a headline from a recent article by The Financial Times. It’s something that’s apparently been in the works for months.
Taxing foreign capital being invested into US assets is an idea that’s been floated by individuals with close ties to the Trump Administration, and it could have profound effects on the markets. That’s why we’re going to take a look at what has been proposed, why it’s been proposed, when it could be implemented, how it could affect the markets and the alternative that could be implemented instead.
US Tax On Foreign Investments
While the idea of taxing foreign capital coming into US assets has been around for decades, it wasn’t taken seriously until the summer of 2019 when a bipartisan bill called the “Competitive Dollar for Jobs and Prosperity Act” was tabled by US Senators Tammy Baldwin and Josh Hawley.
According to a 2019 Bloomberg article by economist and professor Michael Pettis, “The tax would aim to reduce capital inflows until they broadly match outflows because a country’s capital account must always and exactly match its current account. If the American capital account is balanced, then its current account must also be balanced, and the US trade deficit would effectively disappear.”
In plain English, a tax on foreign investments in US assets would make the economy more balanced by reducing its reliance on financialization and increasing actual economic growth — like manufacturing. Not sure if you’ve noticed, but this has been one of the areas of focus for the Trump Administration. Not surprisingly, the 2019 bill to tax foreign investments into US assets never got off the ground. What is surprising, though, is that American Compass, a think tank with close ties to Vice President JD Vance, recently published an article arguing that the 2019 bill should be seriously reconsidered and ideally passed.
