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Global Investment Flows Tumble on Trump Tax Reform

Global Investment Flows Tumble on Trump Tax ReformGlobal Investment Flows Tumble on Trump Tax Reform

US President Donald Trump’s tax reform caused a major disruption in global investment flows, with the United States bringing more money home than it sent out in the first quarter for the first time since 2005, an OECD study showed.

The study from the Paris-based Organization for Economic Cooperation and Development is the first to reveal data on the impact of Trump’s Tax Cuts and Jobs Act on foreign direct investment flows, the OECD said, Reuters reported.

It found that global foreign direct investment outflows tumbled 44% to $136 billion in the first quarter of this year, from $242 billion in the previous quarter.

That was largely due to a switch to negative outward investments from the United States—meaning that American companies brought back more money home than they sent abroad in the quarter, Maria Borga, a statistician at the OECD’s investment division told Reuters.

The Tax Cuts and Jobs Act passed in December was touted as a way to create more jobs, drive US economic growth and level the playing field with companies based outside the United States. It slashed the corporate income tax rate to 21% from 35% and charges multinationals a one-time tax on profits held overseas.

Outward investment from the United States fell to minus $145 billion, registering negative for the first time since the fourth quarter of 2005.

The change was due to large repatriations of profits by US parent companies from their foreign affiliates.

“At this point it probably is essentially their financial assets, cash holdings that they’re bringing and it’s probably not going to have an immediate impact in terms of employment or value added at their foreign operations,” Borga said.

 

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