The global effects of U.S. Tax Reform

Its Impact in Mexico

Photo by: Business Conexión

At a conference held in Ensenada, Erick Guerrero Rosas, an economic analyst and financial advisor, spoke about the impact the U.S. tax reform has and will have on Mexico and the rest of the world.

The analyst explained that due to Trump’s tax reform, the U.S. would become a real magnet to attract capital that is currently being invested in other parts of the world. In addition, it would exert a “vacuum” effect, attracting a large amount of money that will leave Europe, Asia and the rest of the American continent; for Mexico and the rest of the world would mean capital flight and turbulence in the financial markets.

However, there is a positive side that stems from this fiscal reform, which will greatly benefit Mexico. In the second phase of the impact caused by this reform, the U.S. is likely to experience economic growth due to profit repatriation. The GDP will grow from 2% to 3.5%, reaching up to 4.5%. Therefore, supply of foreign currency in Mexico will increase, exports and remittances will accelerate, and productive investment flows will return, especially once the benefits produced by NAFTA’s implementation become palpable. “The Mexico’s next president, regardless of which party he belongs to, will fall in a financial cushion, having all the conditions to cause acceleration in economic growth,” Guerrero Rosas stated.

He shared that the consensus between analysts continues to anticipate a strong expansion of the U.S. economy for the remainder of 2018 and 2019. This is supported, in part, by solid growth in consumption and private investment, coming from the recently approved tax reform. In addition, the U.S. economic boom will result from what President Trump calls the greatest infrastructure investment in the history of the United States, which will generate an unprecedented investment amounting to between 1.5 and 1.7 trillion USD.

Regrettably, Guerrero Rosas, along with other economic analysts, agrees that.... Continue reading article here

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