Will Trumpian tariffs attract more foreign direct investment?

 [[{“value”:”That is the theme of my latest Bloomberg column, here is one excerpt: In the debates over Brexit almost a decade ago, it was periodically suggested that Britain’s higher trade barriers with the EU could lead to a beneficial upsurge in foreign direct investment, to serve the British market. So far Britain continues to languish
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That is the theme of my latest Bloomberg column, here is one excerpt:

In the debates over Brexit almost a decade ago, it was periodically suggested that Britain’s higher trade barriers with the EU could lead to a beneficial upsurge in foreign direct investment, to serve the British market. So far Britain continues to languish in stagnation, and foreign direct investment into the country has fallen. To the extent a nation is not part of the world’s free-trade system, it may be less desirable to invest there.

Now consider the US. It is a much bigger market than Britain, yet a Trumpian trade war will not in every way reassure foreign investors. “America First” is a big part of the core Trump message, and foreign investors may fear their longer-term rights will not be fully respected under such a regime. In contrast, Ronald Reagan’s threat to Japanese automakers four decades ago was one small part of a broader commitment to the US as a (mostly) free-trading nation.

Trump, it is fair to say, does not share that commitment. Under Trump’s plans for tariff hikes, the US would repudiate all of its previous trade agreements, including with neighbors and major trade partners Canada and Mexico. Would anyone be surprised if Trump’s next step was to impose a higher corporate tax rate on foreign-owned capital in the US?

Countries that have been successful at attracting foreign capital, such as Singapore and Ireland, have tended to follow a similar strategy: They are credible, predictable and keep their word.

Note also that capital inflows strengthen the dollar, which is not in every way consistent with Trump’s other objectives…

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 Economics