Hedge fund manager Kyle Bass likened President Donald Trump’s trade and tax policies to gasoline -- hastening an economic restructuring in China while stimulating capital investment and growth in the U.S.
China has “recklessly built a system that’s going to need to restructure and that just so happens to be metastasizing right when Trump becomes elected,” Bass told Bloomberg Television’s Erik Schatzker on Wednesday. “This is a fire that’s been smoldering and it’s now starting to burn, and Trump is just more gasoline.”
Imposing tariffs on Chinese imports could have “profound consequences” for the nation’s economy, where credit over the last 18 months has grown by $6.5 trillion while deposits expanded just $3 trillion, said Bass, 47, the founder of Dallas-based Hayman Capital Management. Early last year, Bass called for a 30 percent devaluation in the yuan against the dollar, and he’s since opened two Asia-focused funds to wager on the imbalances in the region, which he said could extend to Hong Kong and Taiwan.
“The idea that China is now the driving economic power in the world, I think, is illusory or somewhat of a fallacy,” he said. “It’s safe to say that the Asian theater is where we’ve been focused.”
In the U.S., Bass said, border tax adjustments will help finance a lower corporate tax rate that Trump has proposed, which in combination with the repatriation of capital offshore will be “extremely stimulative.” He said Trump’s accelerated policies would lead to real capital investment, competitiveness and an improvement in productivity.
The impact will be “positive for the United States and slightly negative for the rest of the world,” he said. “But it’s not the globalist nightmare, in my opinion.”
Inflation, set to increase in the U.S., will also spike in Germany, which will prompt a tapering of the European Central Bank’s bond-buying program and possibly an increase in interest rates, he said. The move to do so will be sped up by Trump, he said.
Bass’s master fund reaped about 25 percent last year on bets placed across global rates and currencies, Bloomberg reported earlier this month. The hedge fund firm made money off of the U.S. election, placing currency bets on election night while the market fled to safe assets, he said today.
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