One sign that federal tax reform is likely to benefit the American economy: Chinese leaders are preparing to fight back. Randall Forsyth explains in Barron’s.
Thank goodness for tax reform. Of course, there is wide disagreement among the legislation’s Republican fans, who believe tax cuts will spur the already steadily growing U.S. economy to greater heights, and their Democratic foes, who see them as a gift to corporations and the rich, with scant benefit to the middle class and poor. But the news from Capitol Hill could at least drown out some of the incessant buzz about Bitcoin and other cryptocurrencies, as well as provide a distraction from the depressing parade of revelations about sexual predators.
While Americans are divided about the impact of tax reform, as they are about most things these days, other countries aren’t so conflicted. Most notably, China worries about the effect of the U.S. slashing its corporate tax rate from a statutory 35% currently to 21%, which reportedly was agreed to by House-Senate conferees.
Combined with higher U.S. interest rates, lower taxes could lure investment to America. The South China Morning Post warned that the tax cuts imposed a “burden” on Chinese companies. According to The Wall Street Journal, the People’s Bank of China is preparing an array of tools to slow capital flight, including higher interest rates, capital controls, and currency intervention.