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Welcome to 21st century trade

| Posted by: Paul Donovan | Tags: Paul Donovan

  • In the 19th century, taxes on trade sort of worked. They were negative for the economy, but companies could not move to avoid them. 21st century trade is a lot more complex – it is estimated that 40% of global trade is within companies. Companies can shift production.
  • Harley Davidson's decision to move production out of the US is logical. If bikes are made in the US, EU taxes on trade hurt the US economy, Harley Davidson profits, and possibly the EU consumer. If bikes are made elsewhere, EU taxes on trade hurt the US economy but do not hurt Harley Davidson profits or the EU consumer.
  • US President Trump's adviser Navarro was trying to calm market fears over threatened trade action. Navarro suggested equity market falls were an overreaction given the strength of the US economy. Most S&P earnings come from outside the US. 21st century trade disputes hurt listed companies far, far more than they hurt the economy.
  • Eurozone politics continue ahead of the EU summit. Economically, the Euro does not work, has never worked, and economists said it would not work from the start. The Euro needs reform to make it work better. Those reforms are being proposed, but disputed.