100 Days of Change – Trade Policy Chess

Dear Clients and Friends:

Trade policy has become a hot issue since President Trump took office.  Many investors are finding that his proposed trade policy may be his most significant initiative.

Click here to read the article entitled Trade Policy Chess by Dr. David Kelly and J.P. Morgan, which compares a value-added tax (VAT), a tariff and a border adjustment tax (BAT).  The article concludes that a VAT is the better solution.

Dr. Kelly makes the following points in his article:

  • While the first days of the new administration have featured many important statements and decisions, policy changes on trade and corporate taxes could be the most consequential for markets.
  • When analyzing policies in this area, it is crucial to understand the differences and similarities among a tariff, a value-added tax (VAT) and a cash-flow tax with border adjustments (BAT).
  • One possible outcome could be a relatively low-rate BAT as a replacement to the U.S. corporate income tax.  A BAT would likely boost U.S. inflation, interest rates, the value of the dollar and after-tax corporate earnings.  It would also reduce foreign investments and could trigger damaging retaliation from trade partners.

We sincerely appreciate your continued business and hope that you find the article interesting and useful.  If you have any questions or concerns, please contact Steve at 818.449.3122 or steve@berkson.net.

Very truly yours,
Berkson Asset Management, Inc.
Registered Investment Advisor
Steven M. Berkson, CPA\PFS, CFP®, MBT

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