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Economic optimism muted by trade and Twitter angst

Two CFO surveys paint a picture of economic optimism seriously dampened by concerns over trade, tariff and border tax. But CFOs agree that Trump should get off Twitter!

According to the latest CNBC Global CFO Council Survey, a majority of US CFOs are only 56 per cent confident Congress will pass reforms on corporate taxes. This was a survey of 40 companies conducted between 1 and 10 March. CFO sentiment is evenly spread around the centre when it comes to confidence of corporate tax reform being passed this year, with the majority of those surveyed (almost 80 per cent) split evenly between those who are more than 50 per cent confident and those who are less than 50 per cent confident, as shown in the graph below.

And 52.5 per cent of CFOs oppose a border adjustment tax as part of a comprehensive corporate tax reform, while just 15 per cent support it.

Trade wars with China?

The survey found that CFOs are more concerned when it comes to the US's trade relationship with China. The vast majority – 95 per cent – said they are either 'somewhat concerned' or 'very concerned' that the Trump administration's trade policies will lead to a trade war between the US and China.

The graph below also shows that biggest external risk factors facing US businesses are consumer demand, followed by US trade policy, the US dollar and China. Cyber attacks are perceived as a less imminent risk, ranked in fifth place.

Also of note is that more than 60 per cent of the CFOs surveyed said that Trump's immigration policies, including the travel restrictions on people from specific countries, will have a negative impact on their business. The majority of respondents think that the Fed is likely to raise interest rates twice in 2017. Interestingly, more than 60 per cent of CFOs thought that the rise of populism in the US and Europe has had a negative impact on global economic growth and has also negatively affected global business spending.

Trump: get off Twitter!

Another survey, the CFO Global Business Outlook survey conducted by Duke University, found there is some economic optimism among CFOs and many think the new administration's policies will be good for business – but many are wary of the US President's volatile comments on Twitter, which they feel cause uncertainty and pose a threat to business. The Duke University survey polled nearly 900 CFOs and ended on 10 March.

The majority of CFOs – 67 per cent – said Trump should stop using Twitter and 64 per cent were against building a wall along the Mexican border. It was also found that 58 per cent support the plan to restrict immigration from specific countries – a direct contradiction of the finding in the CNBC CFO survey, which found that six out of 10 CFOs think this policy will be bad for business.

US tariff and border tax policies cause concern

In terms of tax reforms, the majority of CFOs surveyed by Duke University were in favour of reducing corporate income tax to as low as 20 per cent and easing the repatriation of foreign profits. The CNBC survey showed that CFOs feel uncertain about the Trump administration's ability to actually implement corporate tax reforms. Fifty-seven per cent said that a substantial tariff on Chinese and Mexican goods would be bad or very bad for the economy. And 85 per cent of CFOs directly affected by border tax said that imposing border tax would hurt their bottom line. This is broadly in line with the findings of the CNBC CFO survey.

Government policies were the top concern for US businesses, while European businesses were more concerned about economic uncertainty.

CTMfile take: Although there are some differing results with regards to CFO attitudes to the Trump administration's immigration policies, the two CFO survey results are broadly in line in showing negative attitudes towards tariff and trade policies – particularly those involving Mexico and China. But overall CFOs seem to think the new administration will be positive for the US economy.

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Cash & Liquidity Management
Cash & Liquidity Management in North America

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