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In a recent interview with the Financial Times, billionaire hedge fund manager John Paulson dismissed concerns from Wall Street regarding the potential negative economic impact of Donald Trump’s proposed tariff increases. Paulson advocated for the US to “decouple” from China, shifting from his previous criticism of Trump’s trade policies. Paulson referred to “strategic tariffs” as an essential tool to achieve an equitable trading environment.
“We’re not in a period of free trade,” Paulson stated. “It’s very one-sided.” He expressed respect for Trump’s approach, acknowledging possible communication issues but affirming his agreement with Trump’s underlying intentions. Paulson, a significant donor to Trump’s campaign, has been speculated as a potential candidate for Treasury secretary if Trump wins the upcoming election.
Earlier this month, Trump threatened to impose 100% tariffs on imports from countries moving away from using the US dollar. Economists have cautioned that heightened tariffs could adversely affect consumers, slow economic growth, and increase inflation. The Tax Foundation has reported that Trump’s proposed high tariffs on Chinese goods and various imports could elevate costs for US businesses and contract the economy.
Paulson’s current stance contrasts with his statements made in April, where he criticized tariffs as a “blunt tool” for addressing trade imbalances and stated there was no need to decouple from China. In his latest comments, Paulson noted that China has become increasingly adversarial towards the US and has deterred foreign investment, indicating an economic decoupling has already commenced.
Paulson, who gained significant wealth from shorting the housing market ahead of its 2008 collapse, remarked that while he formerly believed in the benefits of free trade, he now sees trade as unfairly implemented. He provided an example where Steinway Musical Instruments, one of his investments, faces a 30% tariff selling in China, compared to the modest 3% tariff imposed by the US for similar goods.
Paulson shared personal experiences of the adverse impacts of these tariffs, indicating that some companies he is affiliated with are considering relocating production offshore. He emphasized the need to protect American manufacturers.
On the matter of Trump’s deportation plans, Paulson suggested that the former president would implement these in phases. While supporting immigration, Paulson expressed approval for deporting criminals and criticized Democratic nominee Kamala Harris’ plans to increase corporate and capital gains taxes along with a new levy on unrealized gains for individuals with a net worth over $100 million, predicting these measures would lead to a market crash and recession.
Despite speculation regarding a potential Treasury role, Paulson stated that his substantial holdings could pose conflicts of interest, particularly with his investments in Fannie Mae and Freddie Mac. He argued that these entities are now capable of operating as private companies, which would benefit shareholders like himself.
Paulson expressed belief that a Trump presidency would enhance natural gas production, revitalizing manufacturing, and improve government efficiency. Trump has suggested appointing Elon Musk to lead a commission to audit and reform regulatory structures.