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Billionaire hedge fund manager John Paulson has dismissed concerns from Wall Street that Donald Trump’s proposed tariffs would damage the economy. Paulson has advocated for the US to sever economic ties with China. This marks a departure from his previous criticism of Trump’s trade policies, with the prominent Republican donor now endorsing “strategic tariffs” as a necessary tool for equitable trade negotiations.
In an interview with the Financial Times, Paulson emphasized that current trade practices are skewed, stating, “We’re not in the period of free trade; it’s very one-sided.” He expressed support for Trump, praising his stance on tariffs, despite occasional communication shortcomings. Paulson suggested that exploring Trump’s ideas validated their accuracy.
Trump recently threatened to impose 100% tariffs on imports from nations moving away from the US dollar. Economists have cautioned that such increased tariffs could negatively impact consumers, slow economic growth, and fuel inflation. The Tax Foundation, which advocates for lower taxes and streamlined tax codes, indicated that Trump’s proposal for substantial tariffs on Chinese goods and other imports would increase costs for US businesses and shrink the economy.
Paulson’s recent statements contrast with his position in April, when he described tariffs as an ineffective measure for addressing trade imbalances and opposed decoupling from China. His current view reflects increased antagonism from Beijing towards the US, which he believes is driving foreign investment out of China. Paulson asserted that economic separation from China is now a necessity.
Paulson, who gained significant wealth by predicting the 2008 housing market crash, acknowledged that while free trade is theoretically beneficial, it has not been implemented fairly. He cited his personal experience with Steinway Musical Instruments, which faces a 30% tariff for selling woodwind instruments in China, compared to a 3% tariff imposed by the US on similar imports. He stressed the daily impact of these imbalances on his investments and other US businesses, many of which are considering relocating operations offshore due to the disparity. He emphasized the need to protect American manufacturers.
Regarding Trump’s pledge to conduct the largest deportation in US history, Paulson indicated that the former president would execute his plan in stages, expressing support for fair immigration and the deportation of criminals.
Paulson criticized Democratic presidential nominee Kamala Harris’s proposals to increase corporate taxes, capital gains taxes, and a new levy on unrealized gains for individuals with net worths exceeding $100 million. He argued that these policies would precipitate a market crash and immediate recession.
Although Paulson has been mentioned as a possible Treasury secretary under a Trump administration, he acknowledged the challenges due to his substantial holdings. One of his investments, preferred shares in Fannie Mae and Freddie Mac, presents a potential conflict of interest. Paulson supports the reversion of these state-backed mortgage guarantee groups to private companies, which would be financially advantageous for him as a shareholder.
Paulson predicted that a Trump presidency would boost natural gas production, enhance manufacturing, and improve government efficiency. Trump has proposed appointing Elon Musk to lead a commission aimed at auditing the administration and implementing significant regulatory reforms.
