World Trade Turned Upside Down


The NewCo Daily: Today’s Top Stories

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Remember the uproar over the Trump administration’s briefly floated idea of slapping a 20 percent tax on Mexican imports to pay for a border wall? (It’s okay if you don’t! Yeah, this was only last week, but there’s way too much to keep up with right now.) It turns out that the clumsily introduced tariff plan was actually a garbled presentation of a longstanding Republican proposal for a “border adjustment” tax (Quartz). The idea is to eliminate the current corporate income tax and replace it with, among other things, a broad 20 percent tax on all imports — effectively, substituting a tax on consumer spending for a tax on corporate profits.

Why would anyone want to do that? People across the political spectrum tend to agree that the U.S.’s corporate tax structure is busted: In theory its rates are high, but in practice companies get away with paying a lot less — often by parking profits overseas. Border adjustment is a plan embraced by conservative economists and lawmakers to keep money coming in to the federal coffers and encourage companies to repatriate their cash hoards while revamping the business tax structure. It’s part of a larger tax-reform scheme on the GOP policy roadmap that resembles the VAT (value-added tax) many European countries use, and it has implications for everything from international currency exchange to the price of eggs.

There are a few problems: President Trump seems to dislike the idea, favoring selective use of punitive tariffs as bargaining chips. And the American people may resent the impact on their wallets. A study cited in The Washington Post finds that a 20 percent border adjustment would cost the typical U.S. family $1000 a year. This is guesswork, to be sure; conservatives think cutting the corporate tax will help the economy grow and benefit everyone, and some economists believe manufacturers and retailers will swallow some of the adjustment costs themselves rather than passing them on to consumers. But on the face of it, “border adjustment” sure looks like a simple swap: Lift a tax on corporations and pile one on the backs of consumers.

Banking Is Ripe For Some New, User-Friendly Challengers

Recent scandals at Wells Fargo and Deutsche Bank have reminded us that, despite limited reforms following the financial collapse of 2008, the banking industry remains a mess. It’s overdue for a newcomer to introduce a “Netflix model” that puts customers first, just as Netflix beat Blockbuster, writes Kalpesh Kapadia (Recode).

Millennials whose financial perspectives were shaped by the 2008 crisis simply don’t trust banks, and the recent scandals have only further alienated them. The business model of today’s banks — heavily dependent on stealth fees and exorbitant credit-card interest rates — preys on customers. The opening is there for a new-model bank service that serves users fairly, meets them on the mobile platforms they inhabit, and operates transparently. Such an offering could come from a startup, an incumbent, or a related enterprise like Paypal — but one way or another, it’s coming.

Yes, We Have No Bacon Shortage

Did someone say “bacon shortage”? Like a viral supernova, that phrase shot across social networks and news aggregators yesterday. The panic was sparked by a widely recirculated report from a trade organization that the national inventory of frozen pork bellies had hit a half-century low.

Pork bellies are hot, and the hearty demand was a sign of our robust national appetite for all things bacon, writes Joe Coscarelli in The New York Times. This was surely of great interest to investors in pork-belly futures. But it did not mean, in any practical sense, that there is or will be any kind of actual bacon shortage. That didn’t stop the Ohio Pork Council from setting up a website at (though right now the site is down — either it’s overwhelmed with traffic, or the pork board had second thoughts and pulled the plug). All just another reminder that it’s easier than ever for fears and panics to propagate online. Over time, if we’re not careful, numbness will set in, as with the boy who cried wolf — or pig.

Mobile 2.0 Will Change Everything All Over Again

We could be on the verge of a transformation of the whole mobile industry — a sort of “Mobile 2.0,” writes Benedict Evans of Andreessen Horowitz. It took a decade from the arrival of Netscape in the ’90s before we could begin to envision what a truly web-based industry and culture might look like. In 2004 that got dubbed “Web 2.0.” Today, a decade after the introduction of the iPhone, we are at a similar moment, of “early constraints and assumptions being abandoned and new models emerging,” Evans argues.

Evans’ Mobile 2.0 is one where we start embracing and exploiting interfaces that are only possible on a phone — particularly swiping as primary navigation and the use of image sensors as “a primary input, on equal terms with the keyboard” — to create experiences that are not “mobile first” but rather “mobile only.”

So far, the transition to mobile has concentrated distribution and revenue further in the hands of a few dominant players, and their role won’t diminish any time soon. But Evans suggests that the power wielded by Apple, Google, Facebook et al. could become a target for the next round of “unbundling.” Meanwhile, the appearance of new classes of devices — like watches, spectacles, and Echo-style voice gadgets — could point the way toward whatever comes after the smartphone. Nothing’s certain but more change.

If you’re as eager to join this conversation as we are to convene it, please join us at the Shift Forum this February 6–8th in San Francisco. We’ve got a very limited number of seats left, and we expect it to sell out shortly. Because the event is held under Chatham House Rule, you’ll have be present to learn from these extraordinary leaders. Non profit and founder discounts are available. We hope to see you there!

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