In the second part of Global financingA conversation with former US Trade Minister Wilber Ross – who served during President Trump’s first term – the discussion is transmitted to the influence of Trump’s tariff and trade policy on executives, financial managers and major commercial partners such as Canada, Mexico and India.
Global financing: What do you recommend to executives and financial managers who move this climate from uncertainty due to American definitions and commercial policy because they define their close and long -term strategies?
Wilber Ross: Yes, it was the restoration and proximity to some things that would develop momentum in any case. President Trump will accelerate this.
Whatever the plan that people had to transfer production, it would be wise to accelerate it. Now, whether it means transferring operations to Mexico or the United States, this is another question. But the days when the company can make one component in a country, the second in another, and the third in another – then they all end up with a fourth country for assembly – ending.
Therefore, it should be more issue than any degree of transportation and whether or not they do, and to the extent that you transfer it. The rules of origin will be more important for Canada, but in particular for Mexico, before. Therefore, as long as one merges it in his thinking, I think the transportation is the wise step that must be done.
GF: Is the message different from the chief executives and financial managers outside the United States?
Ross: Yes, it could be if you adopt similar policies for Trump. We are moving towards an era in which the so -called “protectionism” becomes much more than the axis of the policy of every commercial person. But what Europe should do to be effective is to liberate some. The regulatory burden imposed by European governments on their companies is a real obstacle to re -equipment. Europe has become very interfering in the business community.
Trump also said that he would ask members of the Council of Ministers to cancel a higher percentage of the current regulations for any new note they implement – higher than what we had the first time. The first time, you were asked to cancel two for each one you put. It may pay up to eight, but certainly more than two. This is one thing.
The tax policy is the other thing. You have to look at Trump’s commercial activities in the context of what it does in general. Between abolishing organizational restrictions and reducing corporate taxes, it changes the economic attractiveness of existence in the United States, regardless of customs tariffs. Then when you download it on it, a more stable tariff policy, you have a set of factors that will prove to be very strong.
GFThis means that you also think this will be the result of the current situation?
Ross: Well, well, there will be a natural delay. You cannot build a new facility of any size in 10 minutes. There may be some dislocation in the short term because we are facing a higher tariff, but we do not have after increasing production to compensate.
Now, this is not a global problem. Many of our industries operate with only 70-80 percent. Therefore, they will not only meet the increasing demand, but this will also help them absorb part of the tariff on the imported ingredients. When production increases from 70 or 80 percent, the marginal costs are very small. You will have this factor and perhaps another factor – modify the work. How can it have an important impact on the success of industries globally in every field.
To achieve this purpose, if the head of the US Federal Reserve, Jerome Powell, is slow to reduce interest rates while Europe is moving at a faster pace, it will have effects on currencies clearly.
One of my interests in Europe is that if you reduce interest rates very quickly for the United States, it may have real effects on its currency. It would harm imports but help exports. If you are a European manager, I will be more than ever about the expectations of currency fluctuations.
GF: Looking at the various sectors of the industry, are there sectors that deserve definitions? Are there also sectors that should not see definitions in these negotiations?
RussianWell, I have focused more on those who may need it more than those who might not. However, drugs are a great import of the United States because the prices of drugs in the United States are already higher than others, I don’t think huge definitions on pharmaceutical products will be especially good for our economy.
But they really go to the large element – the car. The manufacture of cars caused the expansion of a factory here and in Mexico. In the auto industry, you should look at the United States and Mexico together due to the concept of the rules of origin. In those areas, this is inevitable. So, I think you are right – it will differ to some extent by industry. But for the largest part, most manufacturing companies may not expect that there will be more customs tariff burden.
GFWill the great American exporters, such as technology manufacturers, are negatively affected by this?
RussianWell, Europe does not have the technological content that we have so far. Giants in Europe are not compared to what we call “The Magnificent Seven” here. Europe’s response appears to have been complaints of anti -monopoly and taxes, in an attempt to operate American companies instead of doing things that would effectively build a European champion.
GFWhat about these American industry sectors, which are directed more towards exports? Are they in danger because of the treatment reciprocity in the short term?
RussianWell, Apparel is an important import from Asian countries, and it will not surprise me if that will continue. Some of these brands, such as the European brand Zara, have become very strong players in the United States. It is a Spanish company, but it produces its materials in Türkiye. Meanwhile, Vietnam and Mexico have become great competitors in what we used to call sports shoes. Therefore, some things will remain there will not be affected by definitions.
But remember that the real purpose of the customs tariff – the purpose that I hope will be achieved in the long run – is to allow the rest of the world to know exactly what they should do to drop our customs tariff, that is, to drop their definitions. The unexpected result of the new American tariff policy can be the long -term tariff.
Take India, for example. India’s tariff is very high on most products. Prime Minister Narendra Moody wants to manufacture India. It is a logical place to compete with China if they can meet their infrastructure needs, because Indians have very good manufacturing skills, technological skills and engineering skills. They have a large population base, so there is no reason they cannot compete. What was hindering them was the need for more roads and railways. You need such things in the way of transporting transportation to be more advanced for India to flourish. There is a good opportunity to do PM MDI.
Vietnam has already greatly benefited from the pressures that are placed on China, which is likely to continue. However, Vietnam has a much smaller economy and population, so China cannot be replaced remotely.
