US Tax Reform and

Foreign Trade

Vocabulary

Video: Tax Reforms and Foreign Trade

Transcript

Trade between the EU and the US is booming.

But will it continue to do so?

Much of Donald Trump’s trade plans remains unclear. For example early versions of the Republican tax bill included a twenty percent (20%) excise tax on companies’ purchases from foreign subsidiaries.

That was aimed at discouraging American firms from producing abroad.

But it would also hurt German car makers with plants in the US that import their components from Germany.

Holger Bignmann, BGA Foreign Trade Association President: “Now there’s another threat of higher duties on imports. That frightens us because they’re unpredictable, and don’t comply with World Trade Organization rules. So nobody knows what effect they will have.”

There are now concerns that Trump’s reform could trigger a global race to lower corporate taxes: the EU average is around twenty-two percent (22%), slightly higher than in the US after this legislation takes effect.

In many countries, rates are much higher, including Germany where it’s around thirty percent (30%). That could lead to German investment being diverted to the US.

Holger Bignmann, BGA Foreign Trade Association President: “One thing Trump is successful at is stimulating the American economy, and if pushes through massive tax cuts in the US, that will lead to German companies investing there.”

As a result, their profits and jobs could shift to the US as well. “America First”, Trump’s favorite slogan, is getting a boost from the tax reform package.

Questions

1. Commerce between the United States and European Union will continue to grow. Yes, no, maybe or perhaps not?

2. Is there certainty regarding US trade policies? Is this good, bad, both, neither or it depends?

3. What is an excise tax? What is it’s purpose? Is it good, bad or it depends for business? What do German industries think about them?

4. Would US policy changes have a domino effect?

5. Would it be business as usual for German companies or would there be changes?

6. What is behind Trump’s reforms? Why is he pushing that?

A. Are corporate taxes in your country high, low or modest? What do different people think about that? Should they be raised, lowered or remain the same?

B. There is much trade between my country and the US. Yes or no? Is there free trade? Which nations are your main trading partners?

C. Should there be higher or lower tariffs on imported goods or should it remain the same? Should they be completely eliminated?

D. Is there a large economic difference between free and restricted trade?

E. What will happen in the future?