More tax, More Imports…..

“A weak dollar is good for the US economy”. Whenever Trump administration makes this statement, it puts a smile on my face. They talk about it as if they have deliberately made that happen.

As I have clearly explained in yesterday’s report, the reason why dollar keeps falling is that the US in in deep water. Not to mention investors’ risk appetite. Everyone sells dollars to buy assets. What else would we expect? The result is more than normal.

The US is the 2nd largest exporter in the world. China ranks first. And America maintains its place no matter what the value of dollar is. However, even weak dollar cannot save Trump now, who has recently recalled American investments abroad. With the costs in the US, no business can price their products properly.

Maybe that’s why Trump’s tax reform plan was intended for high-income households and large corporations rather than low-income households. But I don’t think this would be enough, because, any reform or parity movement in the world can make American manufacturing process and structure cheaper/affordable than the one in countries competing with America. Any attempt to get the US ready for a price competition with Vietnam in just 2 years is not even remotely possible.

“Self-criticism works better in good times…”

None of it matters anyway. As I have been saying consistently for the past few years, the “age of reason” is over. Similarly in Turkey, Government tried to narrow down trade deficit by making imports more and more expensive. As a result, imports growth rate has exceeded exports growth rate. As you all know, I’ve already told you this would happen.

Ranking 31st in exports worldwide, Turkey is the 21st largest importer in the world, which shows that Turkey should have made efforts for increasing exports rather than trying to reduce imports. Besides, considering more than 85% of Turkish imports consist of raw material, intermediate and investment goods, it is not possible to reduce trade deficit by imposing additional taxes on final goods. Such a strategy always brings side-effects as inflation and high cost of living.

In short, it looks like global economy and trade will continue to perform well in 2018. I must say that, during such times, it’s better to revise all non-functioning policies and solutions.