Economy

Trump’s Trade War Could Lead to Another Round of Buybacks

JM Ashby
Written by JM Ashby

Corporate America has already funneled the GOP's tax cuts into a trillion dollars in stock buybacks and dividend payments, but we may see another around of buybacks in the near future.

Investors who spoke to Reuters say Trump's trade war will likely lead to a slowdown in corporate investment plans and, as a result, corporations may float the value of their stock with more buybacks.

NEW YORK (Reuters) - The escalating trade war between the United States and China may prompt U.S. companies to shift money they had earmarked for capital expenditures into stock buybacks instead, pushing record levels of corporate share repurchases even higher. [...]

Instead, fund managers say, the reality of tit-for-tat U.S. and Chinese tariffs on more than $34 billion worth of goods - and the U.S. threat to slap additional tariffs on more than $200 billion worth of Chinese products - may undermine business confidence, freezing corporate investment plans.

We've discussed the possibility that Wall Street and Corporate America will pretend things are normal for as long as they possibly can and this seems like a facet of that. Artificially boosting the value of the company to maintain appearances while Trump wrecks the world is not something they can do forever, but they can for a time.

What will happen when the music finally stops playing?

  • muselet

    Corporations may, by design, be sociopathic, but they’re not stupid (or, more accurately, their boards of directors aren’t collectively stupid). There’s no point in making capital expenditures if Donald Trump’s trade wars blow the world economy to flinders, so a share buyback is a rational, if unseemly, decision to make.

    And when the music stops, the corporations will buy enough politicians to get reimbursed for the losses they so tragically suffered, just like last time.

    –alopecia

  • Ceoltoir

    This has been referred to as the Wile E. Coyote economy, where he runs off a cliff and is just standing there hanging in the air. Does anyone need a reminder of what happens when Wile E. Coyote finally looks down?

  • What will happen when the music finally stops playing?

    Oh, that’s easy. The 1% will get richer and the rest of us won’t AND we will be left with the bill to clean up the mess.

  • Aynwrong

    “What will happen when the music finally stops playing?”

    We all fall down.

    Different kids game, I know. But it fits.

    • ninjaf

      Or The Titanic will have sunk while the Congress was rearranging the proverbial deck chairs.

      • Tony Lavely

        “Or The Titanic will have sunk while the Congress was *selling* the proverbial deck chairs.”
        FTFY.

  • katanahamon

    Rump will order the hardest hit, like farmers, to receive a taxpayer funded bailout to preserve their voting base. So not only will we pay for the initial giveaway to the rich, we will pay for every consequence and bit of fallout (maybe literally) that occurs and give our money to preserve Republican votes.

    • La Befana

      I don`t know who to contact and am at a loss to know what to do and hope you can help. I don`t know what I did or didn`t do but I am unable to leave a comment on dailybanter. It seemed to start after I purchased membership.

      • katanahamon

        I just tried to comment over there too..they are messing around with the site comments..it says the comment is being checked before posting. They’ll probably fix it soon..

        • La Befana

          Thanks so much for replying, thought it was something I did/didn`t do.