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US tax reform drives CFO optimism but policy concerns remain

CFO optimism about doing business in the US is driven by tax reform and a positive economic outlook – but concerns about restricted flows of goods, capital and people could curb growth. This is according to a study by Zurich – Borders vs Barriers. Navigating uncertainty in the US business environment – which looks at the risks posed by protectionism and the changing shape of globalisation. Based on a global survey of 500 CFOs in 30 countries, the report aims to help business leaders put their company’s strategic objectives into perspective amid geopolitical trends and surprise events.

Some of the key takeaways were:

  • CFOs were bullish on doing business in the US, mainly due to a positive economic outlook and the passage of landmark tax reform.
  • CFOs are concerned about US policies that would restrict the flow of goods, capital and people, as these could negatively impact the current positive business environment.
  • The improved outlook for the US economy is generating optimism about growth among CFOs, yet at the same time, there are high levels of concern with unconventional or inward policy shifts from the US. This raises the question of how companies are approaching the difficult task of integrating this uncertainty into their business planning and whether they can be prepared for any potential adverse and longer-term impact of geopolitical events.

The report points to some of the significant changes that have happened in the US in the past year:

  • the US administration has questioned long-standing trade agreements, reopening negotiations on the 25-year-old North America Free Trade Agreement (Nafta);
  • it withdrew from multilateral agreements, such as the Paris Agreement and the Trans-Pacific Partnership (TPP);
  • US Congress passed the most significant changes to its tax code in 30 years;
  • it has challenged traditional defense treaties.

However, the survey found that CFOs are most concerned about policies that would restrict the flow of goods, capital and people:

  • 68 per cent of CFOs surveyed expect growth of US protectionism in the next one to three years, and
  • 46 per cent fear this growth will negatively impact investment.

CTMfile take: Some of the advice given by the report includes: “Leading organizations must increasingly consider geopolitics in their business strategy; explore contingent scenarios; make preparations; engage with stakeholders and policymakers on local and national levels; and potentially shift operations to seize opportunity and mitigate risks, whether financial, locational, political or social.”

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