AGF Management : Tax Treaty Beakdown Increases Chances of Trade War; The Bolton Book Won’t Change Anything

Insights and Market Perspectives

Author: 8

June 18, 2020

THE COLLAPSE OF GLOBAL TAX negotiations yesterday has greatly increased the likelihood of another trade war, with new taxes and tariffs looming in Europe and the U.S.

TREASURY SECRETARY MNUCIN has declared an impasse on talks over taxation of multinational firms. Unless the talks resume soon, which appears very unlikely, European nations will retaliate with new taxes on U.S. tech giants, which in turn will prompt additional tariffs from the U.S. on a wide range of European goods.

AT THE HEART OF THIS ISSUE is a dispute over where digital companies pay taxes - and the desire of virtually every country to grab higher taxes from the fabulously profitable U.S. tech firms. With economies struggling in most of Europe, a tax grab is a very appealing option.

FRANCE SEEMS LIKELY to lead the way; it already has imposed higher taxes on U.S. digital firms, and may increase them in the coming weeks. This almost certainly would prompt an additional U.S. tariff hike on a wide range of French products, with other European countries facing higher fees by late this year.

THE LEAST APPRECIATED ASPECT of this looming trade war is that members of both political parties in the U.S. are determined to resist a tax grab that would hurt American tech giants - and besides, the U.S. wants the taxes.

JUST AS A TOUGH STANCE against China's trade practices has won bipartisan support in Congress, there's a strong belief that a tax grab from European countries must be resisted. So - if you like European wine, it may be time to stock up, because another hike in U.S. tariffs looks increasingly likely.
* * * * *
THE BOLTON BOOK: Washington is buzzing, naturally, over the John Bolton book. We've read all the summaries and must say - there's nothing surprising about the revelations, and there's nothing surprising about the scathing reaction from both political parties to the duplicitous Bolton. Here's our main take-away -

PEOPLE WHO LOVE TRUMP will continue to love him. People who hate Trump will continue to hate him. The opinion of foreign leaders who read the book will not change one iota. The book won't affect the election outcome in November; it won't cause many people to vote for or against Trump.

BOB WOODWARD HAS A NEW TRUMP BOOK coming out this fall, and it surely will be as harsh as Bolton's. Once again, voter opinions of Trump will not be affected. If there's any real impact, it will be on Trump himself; he pays close attention to the
criticisms. Has the job become too burdensome and frustrating for him? That's the
more intriguing buzz in Washington.

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF's suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

© 2020 AGF Management Limited. All rights reserved.