Trump threatens U.S. businesses with tax increases if they don’t return to U.S. manufacturing

WASHINGTON, May 15 (Reuters) – U.S. President Donald Trump threatened to impose a new tax on U.S. companies that make goods outside the U.S. on Thursday, in what is seen as another move by the Trump administration to force supply chains to move from China to the U.S. and impose new trade barriers.

In an interview with Fox Business television in Washington on Thursday, Mr. Trump said taxes could be an “incentive” for U.S. companies to move manufacturing back to the U.S., and he plans to impose new taxes on U.S. companies that make products outside the U.S., though he did not explain whether they would be paid through a full-scale tariff or other form of tax. This may require the U.S. Congress to implement this. While Mr. Trump did not mention China, it is clear that China is its main target, as many U.S. companies make their products in China.

Trump threatens U.S. businesses with tax increases if they don't return to U.S. manufacturing

“If we want to build our own barriers like other countries, 100% of Apple’s products will be made in the United States, and that’s the right way to do that.” Trump gave an example. Most of Apple’s products are now made in Chinese foundrys.

Another U.S. official said the Trump administration was “working hard” to urge U.S. companies to shift production from China to the U.S.

Asked if he would consider giving U.S. companies tax breaks to push them back to the U.S., Mr. Trump said they could be taxed if they didn’t, and suggested they “have a responsibility to return to the U.S.”.

“Frankly, one incentive is to charge them taxes when they produce products outside the U.S. (and no additional taxes are charged if they are produced in the U.S.). We don’t have to do more for them, we have to do it for us. Trump said.

During last year’s U.S.-China trade war, the Trump administration launched a trade war with China over technology transfer and industrial policy, imposing punitive tariffs on $370 billion worth of Chinese imports. But by January, according to the Commerce Department, Mr. Trump’s new tariff spree had cost U.S. companies $46 billion before the virus spread globally. Many business groups and economists are calling on the Trump administration to at least temporarily lower tariffs to ease cost pressures on U.S. companies facing severe revenue declines during the outbreak.

The International Monetary Fund has warned that raising new trade barriers will prolong the worst recession since the Great Depression of the 1930s.

Mr. Trump, who is seeking re-election, needs to win key manufacturing battleground states such as Pennsylvania, Michigan, Ohio and Wisconsin. At Thursday’s meeting, Mr. Trump called the choice of global supply chains “stupid” and said the coronavirus esped their weaknesses because many key products were blocked.

“I said we shouldn’t have a global supply chain. We should put them all in America. We have companies to do it, we can do it. Trump said.

In fact, even after Mr. Trump took office a few years ago, he began pushing manufacturing back to the United States, introducing tax cuts to encourage U.S. and overseas companies to build factories in the U.S., but with little success. The most typical example is Hon Hai’s previous investment in a panel factory in the US, but the plant is still running aground.

Trump threatens U.S. businesses with tax increases if they don't return to U.S. manufacturing

Then, during last year’s Sino-US trade war, the Trump administration blocked Huawei and ZTE in the U.S. market and put Huawei and several Chinese technology companies on a “physical list” in an effort to disrupt the supply chains of China’s leading technology companies and depress the Chinese technology industry. On May 14th the US extended its supply chain ban on Huawei and ZTE for another year.

The Trump administration also appears to be feeling the threat to further improve its u.S.-based manufacturing supply chain in an effort to get rid of china’s dependence on the new corona outbreak, which has seen countries and regions around the world adopt “sealed” and “closed cities” to stop the spread of the virus, but it has also hampered global supply chains.

In early April, Larry Kudlow, the White House economic adviser, put forward a similar proposal to lure U.S. companies out of China and back to the U.S. He suggested that U.S. companies could be “100% directly costed to return to the U.S., including plant, equipment, intellectual property structure, decoration, and so on.” In other words, if we charge 100% of all the total spending directly, it would actually be the cost of moving American companies back to the United States from China. “

The move comes a day after the Japanese government prepared to pay 243.5 billion yen (about 15.8 billion yuan) to fund Japanese companies to pull their production out of China, citing the new crown outbreak.

Against this backdrop, it is not surprising that the Trump administration has further threatened to impose new taxes on U.S. companies that produce products outside the U.S. to force a return to U.S. manufacturing.

From the U.S. perspective, encouraging U.S. companies to move their factories back to the U.S. mainland is indeed a solution to the current decline in the U.S. economy and high unemployment, as well as supply chain security concerns that the Trump administration has. But the root of the problem is that the cost of integrated manufacturing in the U.S. is still higher than in China and Southeast Asian countries, and that the U.S. lacks the corresponding manufacturing talent and supporting industrial chains. More crucially, China is both the world’s factory, with a complete industrial chain and one of the world’s largest consumer markets. “For firms, it is more competitive to place production where the combined cost is lower and the closer it is to the market.”

But we also have to be wary of the Continued Crackdown on China by the U.S. Trump Administration and the continued “anti-globalization” policy.

In particular, tsynosing tsat,” the global wafer foundry leader, TSMC, has finally announced today (May 15) that it will build a 5nm wafer foundry in the United States, perhaps just the beginning, to secure the semiconductor supply chain in the U.S., at the request of the Trump administration. After all, the leading role of the industry leader can not be underestimated.