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

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Insights and Market Perspectives

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

Author: Greg Valliere

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 MNUCHIN 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.


The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

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.

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©2021 AGF Management Limited. All rights reserved.

Written by

Greg Valliere

Greg Valliere

Chief U.S. Policy Strategist

AGF Investments

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