Domestic Policies of the United States

The essay will Comment and evaluate the current economic policies of the United States. It will attempt to answer the question as to how will the economic policies impact the world-wide business or industries? To achieve this goal, the essay will first review some of the economic policies that have been put in place recently in the United States. It will then explore how such policies affect the economy of the US positively and negatively. Then the essay will focus on the impacts of such policies on the key international organizations such as ASEAN, NAFTA and OPEC. Lastly, the essay will give recommendation to a Malaysian company intending to expand to US.

Domestically, the tax reform passed by the US Congress contains many bold measures that Americans have been waiting for. For example, the reduction in corporate profits tax (from 35% to 21%), which is accompanied by a generous tax deduction for companies whose profits are only reported through the income of their owners. Several taxes have also been abolished, such as the 20% minimum tax on effective profits. Above all, President Trump has embarked on a massive operation to repatriate between $ 2,000 and $ 4 trillion of profits abroad, reducing the tax on these profits from 35% to less than 15%. The abolition of the inheritance tax below $ 10 million satisfies a large part of the Republican electorate. Some states with particularly high taxes, such as California, will also be forced to reform to deal with the removal of certain tax deductions. Their inhabitants will no longer be able to deduct the local income tax from their federal taxes. At present, Trump has opened up all the exploitation possibilities on the American continent, which will make the country one of the main exporters of raw materials. Trump is thus positioned as an enemy of the politically correct and remains wary of the gurus of global warming. He was the only one to have the courage to withdraw from the COP 21, this costly masquerade that consists of organizing huge meetings of heads of state at the expense of taxpayers. It has eliminated the electric car premium (for a saving of $ 7 billion) as well as subsidies to wind farms. Internationally, Trump opposes China whose questionable business practices have been investigated by Washington. For example, Trump denounced Trans Pacific Trade. Trump breaks with the economic policy advocated by American governments (Democrats or Republicans) since the Cold War: free trade. Republican Senator John McCain has specifically denounced a serious mistake” that could harm the country. This sends the worrying signal of US disengagement in the Asia-Pacific region at a time when we can afford it less.

The Trump reforms has had a lot of positive impact in most of the industries. A year after taking office, President Trump is leading a country in the midst of an economic boom, whose stock market index has broken all records (Struyk, 2017). The effects of tax cuts are already being felt: companies like AT & T, Comcast, Wells Fargo, Boeing and Nexus Services have announced bonuses and salary increases (Shell 2017). On the household side, tax cuts have boosted consumption significantly, while businesses have a chance to invest more. In addition, fiscal policy could be more expansionary than expected, including an increase in defense spending, which would also stimulate activity. Indeed, the International Monetary Fund (IMF) has once again been optimistic about global economic growth, this time incorporating the short-term impact of US tax reform and the faster pace of growth of advanced economies.

Positive Impact of Trump’s Economic Reforms

Despite the positive impact on some industries, it should be noted that not all industries benefited from the Trump’s economic reforms. The trade wars are bound to hit hard on agriculture sector (Almeida, Durisin and Perez, 2018). The jobs related to this sector will be lost. American farmers are at the center of a trade war with China and other countries launched by President Donald Trump, who was elected with the support of many in the rural areas of the United States. Trump’s announcement of tariffs on $ 50 billion in Chinese products, triggered an immediate retaliation from Beijing over an equivalent of US goods, including agricultural products, especially soy. Several other industries that are good sources of job opportunities will also be affected. Some of the industries that will be hit hard include Harley-Davidson, Brown-Forman and Ford (Welch, Condon and Onoszko, 2018). Others include a pioneer of electric vehicles Tesla, a fertilizer manufacturer Monsanto, recently bought by the German concern Bayer (suffering from duties on American soy), supermarket chain Walmart (in its assortment of many Chinese and European goods) , the multi- industry corporation Procter & Gamble (uses Chinese raw materials), Nike and even the manufacturer of solar panels Vivint Solar. Mazda and Toyota have also been negatively affected (Ma 2018). These companies have been the major source of employment. Besides the companies, the increase in import duties will mean that the cost of the goods will increase. This means that the domestic companies will have to increase the local prices and possibly downsize so as to meet the normal profit margin. Downsizing means that many employees would have to be fired. Additionally, reforming the federal tax system would bring negative impacts on investors, but the twist may lead to improvement in the economy. A drop from 35% to 15% on federal corporation tax will affect foreign investors since they would be forced to repatriate profits held overseas. The venture would boost government revenue but implementing these proposals would raise the deficit by 3% of GDP.

The implications of these policies on the world economy would be severe. It has initiated a serious trade wars. Merkel, for example has retaliated by imposing tariffs on US imports (Wacket 2018). Additionally, the move taken by Trump to limit fair trade with China has adverse repercussion to the ASEAN and may hinder future relationship between United States and Asian countries that are part of ASEAN. Established in 1967, the main concern of the five founding members of the Association of Southeast Asian Nations (ASEAN) is political: their ambitions are modest in economic terms.  In November 2012? ASEAN initiated, on Indonesia’s initiative, a Regional Comprehensive Economic Partnership (RCEP) project, the aim of which is to consolidate the five ASEAN + 1 agreements (Hart & Spero, 2013). The US flip-flop on the TPP following the election of Donald Trump is likely to give renewed vigor and interest to the RCEP project, especially as the likelihood of seeing, for example, Japan reviving the TPP without the US is extremely weak, and it is equally unlikely that the three economic powers of Northeast Asia (China, South Korea, Japan) will agree quickly on a project more ambitious trilateral cooperation. The Trans-Pacific Treaty was signed in 2016 by twelve countries bordering the Pacific Ocean (United States, Canada, Mexico, Chile, Peru, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia and New Caledonia). Zealand) after years of painstaking negotiations, started in 2008. The goal is to create the largest free trade area in the world. China had voluntarily been excluded from talks to curb its growing influence as the United States wanted to tighten its trade ties with countries in the region. But Donald Trump has decided to pull the United States out of this Trans-Pacific Partnership project, wanting to focus on fair and bilateral trade treaties that will bring jobs and industry back to America. The interest of the TPP was the positioning of the United States in Asia. The move is likely to attract retaliation from Asian nations (Toh, 2017). Another impact of Trump move is on The North American Free Trade Agreement (NAFTA). The agreement, which came into effect in January 1994, involves the United States, Canada and Mexico in a large commercial area. Donald Trump, who promised to renegotiate the deal, accuses him of encouraging the exodus of US manufacturing jobs to Mexico. Based on renegotiation plan, two things are likely to happen. Either the partners agree and manage to make it evolve and move forward together. Either the countries do not manage to renegotiate it and in this case, the deal is over. U.S. threats to withdraw from the Paris Accord initiative on climate change is likened to the opposition of NAFTA, and this affected its economy. China was also affected by the reconfiguration of the trade relationships, and the impacts are now hitting on U.S. economy since the supposed reduction of trade deficit is seemingly a lost fortune (Hart & Spero, 2013). Besides, Mexico which is a trade member of NAFTA has been affected by policies revolving around cross-border trading.

The global employer would encounter challenges in the issue of cross-border human resource policy since the U.S. is battling immigration. There would be also challenge related to the taxation. The universal aspect of trade with the U.S. would require him to document global codes of conduct, present documents on safety protocols, employee handbooks, global and regional sales commissions, and global intranets bearing trade rules. The employer will have to reassess and renew all these aspects to comply with vital logistical and legal issues related to HR policies outside the U.S (Cox & Stokes, 2018). He’ll also have to meet the prospects of a dual employer since multinational employees working for foreign affiliates will have the HR policy directly meted on them. Therefore, multinational employers should draft stable cross-border policies for their business.

References

Almeida, I, Durisin, M and Perez, MG (2018) How Trump’s Trade Fight Risks Upending Global Agriculture Flows, The Bloomberg, Available from: https://www.bloomberg.com/news/articles/2018-07-05/how-trump-s-trade-fight-risks-upending-global-agriculture-flows

Baker, SR, Bloom, N & Davis, SJ (2016) Measuring economic policy uncertainty, The Quarterly Journal of Economics, 131(4), pp. 1593-1636.

Brogaard, J, & Detzel, A (2015) The asset-pricing implications of government economic policy uncertainty, Management Science, 61(1), pp. 3-18.

Cox, M & Stokes, D (2018) US foreign policy, Oxford University Press.

Hart, JA & Spero, JE (2013) The politics of international economic relations, Routledge.

Holodny , E (2017) Trump’s tax plan could lead to billions of dollars flooding back to the US, Business Insider, Available from: https://www.pulselive.co.ke/bi/finance/finance-trumps-tax-plan-could-lead-to-billions-of-dollars-flooding-back-to-the-us-id7547049.html

Ma J (2018) Mazda Joins Toyota in Condemning Trump’s Car-Tariff Plans, The Bloomberg, Available from: https://www.bloomberg.com/news/articles/2018-06-29/mazda-joins-toyota-in-condemning-trump-s-car-tariff-plans

Shell A (2017) AT&T, Comcast, Wells Fargo promise bonuses or pay hikes once tax cut bill passes, US Today, Available from: https://www.usatoday.com/story/money/2017/12/20/handful-companies-promise-bonuses-pay-raises/971199001/

Struyk, R (2017) Note to President Trump: The stock market has hit an all-time high in 30 of the last 54 months, CNN, Available from: https://edition.cnn.com/2017/08/02/politics/stock-market-highs-months/index.html

Toh, B (2017) Protectionism that threatens global trade seen as key risk to Malaysia’s economy, The Edge Market, Available from: https://www.theedgemarkets.com/article/protectionism-threatens-global-trade-seen-key-risk-malaysias-economy

Wacket M (2018) Merkel says would back cutting EU tariffs on U.S. car imports, Reuters, Available from: https://www.reuters.com/article/us-usa-trade-eu-autos/merkel-says-would-back-cutting-eu-tariffs-on-u-s-car-imports-idUSKBN1JV13R

Welch, D., Condon, C and Onoszko, M (2018) Car Companies, Parts Makers Urge U.S. to Abandon Tariff Plan, The Bloomberg, Available from: https://www.bloomberg.com/news/articles/2018-07-01/bmw-hyundai-join-gm-in-pressing-u-s-to-forgo-auto-tariffs