Veteran financial guru Larry Kudlow, who served as the Donald Trump campaign's senior economic adviser,said the president-elect's threat of a "big border tax" is actually an appeal to get American companies to remain in the U.S. and have faith in his campaign vows.
Trump took to Twitter on Tuesday to pummel General Motors over its plans to distribute its Mexican-made Chevy Cruze model to American car dealers. In a June press release, GM said it would boost production to meet customer demand by "utilizing existing production capacity in Ramos Arizpe, Mexico, to supplement production at its plant in Lordstown, Ohio."
Trump is not buying it.
Trump's tweet is the latest targeting U.S. companies and threatening them with penalties for operating abroad. And it comes less than a week after Trump announced his two golden rules for his administration: Buy American. Hire American.
“Trump is sending a very important message, of which I completely approve,” Kudlow told CNBC.
“He's basically saying to a lot of these big companies, ‘Look, do not jump ship now. We're on the verge of giving you major, major business tax reform and relief. I'm here to remind you we have new leadership, new sheriff in town. Do not doubt me,'" said Kudlow, a Newsmax Finance Insider, radio talk-show host and CNBC senior contributor.
Trump “is saying that ‘America is going to be the investment destination for the world, going to win the global race for capital and I'm going to enforce this,’” said Kudlow — host of "The Larry Kudlow Show" and author of "JFK and the Reagan Revolution: A Secret History of American Prosperity," written with Brian Domitrovic and published by Portfolio.
Kudlow, who was a key architect of Trump’s tax platform and an early supporter of the real-estate billionaire's campaign, admitted there "tough questions" to answer and other details to be hammered out "to equalize the tax consequences of these transactions."
For years, big U.S. companies have turned to acquisitions of foreign companies to put their overseas cash to work, rather than bring it home at a 35-percent tax rate. Trump has proposed allowing repatriation of this cash at a 10-percent tax rate, hoping some of it will be spent on hiring and investing in their businesses.
Trump also has promised a 15 percent corporate rate. Business groups have long said their members are hurt because U.S. companies pay the most federal income tax -- a 35 percent rate, though the effective rate is often lower -- among the 35 countries in the Organization for Economic Cooperation and Development, Bloomberg reported.
Kudlow, who worked as Reagan’s budget deputy between 1981 and 1985, also called for a Group of 20 summit to try and resolve numerous currency and trade issues.
"All I'm saying is, let's make a deal. You need two deals here. You need trade deals and currency deals. And it has to equalize so these companies, A, don't have to play these games and, B, won't play these games. There will be no incentive for them to play these games."
For his part, Trump did not provide further details but previously vowed to hit companies that shift production from America to other countries with a 35 percent tax on their exports into the United States, Reuters reported. He also has denounced the North American Free Trade Agreement between the United States, Mexico and Canada.
GM, the world's No. 3 automaker, said it sold about 190,000 Cruze cars in the United States in 2016. All of the sedan versions sold in the United States, or about 185,500, were built at its plant in Lordstown, Ohio. About 4,500 hatchback versions of the Cruze were assembled in Mexico and sold in the United States.
"GM builds the Chevrolet Cruze hatchback for global markets in Mexico, with a small number sold in the U.S." it said in a statement posed on its website. The Cruze is one of GM's best-selling cars, although its sales numbers were down significantly in 2016.
(Newsmax wire services contributed to this report).
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