Chinese State Media Warns of Trump Tax Cut’s Implications for Global Economy

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The state-owned Xinhua News Agency warns that the Trump tax cut could have adverse impacts upon the global economic environment.

US President Donald Trump’s recently approved tax plan will see the corporate tax rate reduced to 20% from 35%, as well as reductions in income tax rates, doubling of the standard deduction and the elimination of personal exemptions.

The approval of Trumps’ tax plan by the US Senate has driven Wall Street stocks to record highs, with investors expecting the cuts to encourage US corporations to repatriate hundreds of billions of dollars in profits sequestered overseas.

China has conversely expressed concern about the potential impacts of the tax cuts upon the global economic environment, and by implication its own economy.

An editorial piece published by the Xinhua News Agency entitled “Trump’s Tax Reforms Come to Life – Spillover Effects Worth Noting” (特朗普税改呼之欲出,外溢影响值得关注) expresses concern that the cuts could have implications for tax regimes in other countries.

“The US tax cuts could intensify global competitive tax reductions,” said to the editorial.

“International tax loopholes enable multinational companies to engage in profligate tax avoidance, and competitive tax cuts could worsen the fiscal condition of various countries’ governments…striving to obtain a tax base could instead lead to problems such as duplicate taxation and supply chain distortion.

“For this reason, the tax issue isn’t confined to the internal politics of just one country, but is a multi-lateral issue requiring international cooperation.”

An opinion piece published by the Chinese Communist Party’s flagship news publication The People’s Daily also warns of the pressures that a capital flow back to the US could put on Asian economies.

It cites Xie Dongming, economist at Singapore’s OCBC Bank, as saying that the tax cuts could affect inflation and Federal Reserve rate hike expectations, increasing volatility in regional financial markets.

“From the perspective of Asia, we need to prevent the financial volatility, including share market declines and capital outflows, that excessive inflation expectations bring,” said Xie.”

 

 

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