John Paulson: Decoupling from China and Support for Trump's Trade Policy

The billionaire hedge fund manager John Paulson has dismissed Wall Street's concerns over Donald Trump's plans to increase tariffs and calls for a "decoupling" of the U.S. from China. In a notable shift from his previous criticism of the Republican presidential candidate's trade policy, the Trump mega-donor described "strategic tariffs" as a valuable bargaining tool to level the economic playing field. “We are not in a phase of free trade,” Paulson said in an interview with the Financial Times. “It is very one-sided.” Paulson, a central figure on Wall Street and a potential future treasury secretary under a Trump administration, remarked: “Maybe he doesn't always phrase it perfectly, but when I listen closely and read up, I find that he is absolutely right.” Trump threatened this month to impose tariffs of 100 percent on imports from countries that no longer use the dollar. Some economists warn that increased tariffs could affect consumers, slow growth, and fuel inflation. The Tax Foundation, which advocates for lower taxes and a simpler tax system, stated that Trump's formal proposals for a 60 percent tariff on Chinese goods and 10 to 20 percent tariffs on most other imports would increase costs for U.S. businesses and shrink the economy. Paulson's current remarks contrast with his statements in April, when he described tariffs as a "cumbersome tool" for addressing trade imbalances and said, "We don't want to decouple from China." Paulson emphasized that Beijing has become “more hostile” towards the U.S. and has driven out foreign investment from China. Paulson, who made his fortune by short-selling mortgage securities before the 2008 crash, further explained that current trade practices are not being "fairly implemented." An example given was one of his investments – Steinway Musical Instruments – which is affected by a 30 percent tariff for selling woodwind instruments in China, while the U.S. imposes only a three percent tariff on such instruments. Paulson reported that other companies he has invested in plan to close U.S. factories and relocate to Mexico or abroad. He stressed, “We need to protect American manufacturers.” When asked about Trump’s promise to carry out the largest deportation in U.S. history, Paulson stated that the plan would be implemented in phases and expressed his support for “fair immigration” and the deportation of criminals. Paulson criticized the plans of Democratic presidential candidate Kamala Harris to increase corporate and capital gains taxes, as well as to introduce a new levy on unrealized gains affecting individuals with a net worth of over $100 million. Paulson pointed out that these measures would lead to a market crash and an immediate recession. Despite occasional speculation about a potential role as treasury secretary, Paulson emphasized that his extensive holdings would make it difficult for him to take on a government position. A potential conflict of interest exists with his preferred stocks in Fannie Mae and Freddie Mac, the government-backed groups that guarantee most U.S. mortgages. Paulson believes these should return to being private companies. Paulson also argued that a Trump presidency would increase natural gas production, boost manufacturing, and improve government efficiency. Trump has announced plans to appoint Elon Musk to head a commission to review and drastically reform administrative regulations.