China’s reaction to President Trump’s Tax Reform Act shows that the legislation was also a trade policy

With Congress able to get tax reform legislation passed before the end of 2017, most Americans and small businesses will be able to reap the benefits in their upcoming tax filings for last year.  However with that aside, one of the more interesting consequences of the Tax Reform and Jobs Act is how it is also acting as both a trade policy, and even as a foreign policy.

By foreign policy we mean that it has the potential to effect where foreign businesses and capital choose to flow to now that it is cheaper to invest companies and jobs in the United States.  And it didn’t take long for China to come to this realization as almost immediately after the passage of the bill, they too pushed through a policy which temporarily suspends tax obligations for foreign companies who invest in the Far Eastern economy.

Image result for china and us trade war tax reform

CHINA said yesterday that it will temporarily exempt foreign companies from paying provisional income tax on profits they re-invest into the economy, in a bid to stop foreign firms shifting their operations out of the country.

The move will help “promote growth of foreign investment, improve quality of foreign investment and encourage overseas investors to continuously expand their investment in China,” the finance ministry said on its website.

Analysts say a planned tax cut by US President Donald Trump, which could lead to a repatriation of earnings by US firms, poses a challenge China’s bid to lure foreign investment.

The temporary exemption on provisional income tax is retroactive from January 1, 2017, which means firms that have paid taxes this year will be refunded. – Shanghai Daily

In addition to this swift reaction from China, the European Union is also scrambling to figure out how to deal with a new Damocles Sword that is sitting over their heads due to the potential of losing hundreds of billions if not trillions of dollars from their banks following America’s tax reform legislation.  Because the potential for Europe to experience a new banking and liquidity crisis is very real since foreign deposits are the lifeblood which have allowed most European banks to remain solvent over the past eight years.

It is ironic that simply lowering tax obligations could cause so much chaos, both domestically within the high tax states of New York and California, and internationally in the regions which had in the past offered corporations better deals through cheaper labor and their own lowered taxes.  And following eight years of a global currency war meant to protect ones exports and trade, President Trump’s new tax reform could potentially spark another domino effect around the world of lower taxes elsewhere to try to keep foreign capital in their domains versus it moving West and back to the United States.

Kenneth Schortgen Jr is a writer for The Daily EconomistSecretsofthefed.comRoguemoney.net, and Viral Liberty, and hosts the popular youtube podcast on Mondays, Wednesdays and Fridays. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.

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Democrats everywhere are wildly slinging the “I” word, hoping to nail Trump for high crimes and misdemeanors after the New York Times claimed a memo written by former FBI Director James Comey said the president urged him to end the federal investigation into former national security adviser Michael Flynn. Some members of Congress are getting in on the action. They include Reps. Maxine Water, D-Calif., and Al Green, D-Texas. Even a Republican, Rep. Justin Amash, claimed Wednesday there are grounds to impeach President Trump. House Oversign Committee Chair Rep. Jason Chaffetz, R-Utah, asked for the alleged Comey memo and other documents. Chaffetz tweeted that he is prepared to subpoena the information. And Sen. John McCain, R-Ariz., invoked “Watergate.” Now the Democratic Party is reportedly poll testing impeachment as a 2018 election issue. More than 1 million people signed a petition calling on Congress to impeach Trump. Wasting no time Wednesday, the mainstream media sprang into action, enthusiastically echoing the left’s impeachment calls. MSNBC launched a Watergate ad implying Trump is America’s new Richard Nixon. “Watergate. We know its name because there were reporters who never stopped asking questions,” says MSNBC host Chris Hayes, who hinted that Trump is next on the impeachment chopping block. “Now, who knows where the questions will take us. But I know this: I’m not going to stop asking them.” Meanwhile, some overzealous members of the left plastered fliers around Washington, D.C., demanding all White House staffers resign Wednesday. The posters read: “If you work for this White House you are complicit in hate-mongering, lies, corrupt taking of Americans’ tax money via self-dealing and emoluments, and quite possibly federal crimes and treason. 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