Panikos Teklos: The trade war declared by Trump, the impact and to what degree the ‘shrapnel’ will hit Cyprus

The increase in tariffs and the new US tax policy are causing uncertainty and disruption in global markets, in a situation that remains fluid, while "retaliation" is expected from the affected countries.

At the same time, and according to what Panikos Teklos, partner at XPADIA Global Expansion Strategies, recently told InBusinessNews , the whole situation may lead businesses - especially international ones - to postpone some expansion plans or strategic investments.

However, speaking about the consequences for the Cypriot economy, Teklos noted that it is not expected to be particularly affected directly. There may be some impact indirectly, but it is estimated that even this will be limited.

Uncertainty and refuge in gold

More specifically, when invited by InBusinessNews to decipher the implications of the economic policies of the new US President, Donald Trump, for the global economy, Teklos initially indicated that it is too early to draw conclusions regarding the increase in tariffs and the new US tax policy, while also pointing out that, undoubtedly, uncertainty and turmoil have been created in global markets.

"This uncertainty explains why the price of gold has risen by 8% since the beginning of the year, once again confirming gold's description as a safe-haven asset," he noted.

The investment freeze scenario

Under the current circumstances, one of the possible scenarios, according to Teklos, is the postponement of some expansion plans or the implementation of some strategic investments by businesses - especially international ones - until they can evaluate these decisions with greater certainty and data.

"The situation remains fluid, as reactions are expected from China, Canada, Mexico, the European Union and other affected countries, regarding the ‘retaliation’ they will want to impose on the US and of course any response that may come from Trump's team," he further explained.

The increase in tariffs and its consequences

On a broader academic and practical level, the increase in tariffs, according toTeklos, "has the consequence of increasing inflation, the cost of living and the cost of imports due to higher prices for foreign (to the US) products, reducing trade between the US and other countries and creating a serious possibility for trade wars. At the same time, the reduction in trade can lead to recession in export-dependent economies."

On the other hand, he adds, the tax breaks and/or tax incentives for US citizens that have been announced are expected to support consumption and investment in the US, something that markets have already begun to take into account.

The storm of reactions

President Trump's announcements and intentions for major changes to US tax laws have sparked a storm of reactions from various affected parties.

"President Trump's announcement to ‘close’ the loophole of the favourable tax treatment of carried interest for private equity companies has generated a series of reactions from Private Equity Groups, which have some large shareholders who have already become tax residents of other countries with more favourable tax treatment of their personal income, especially from carried interest," Panikos Teklos points out.

Also, he adds, the study of the possibility of burdensome taxation, with double tax rates for multinational companies and foreign nationals working for them in the US, has created a storm of reactions between the OECD countries and the US.

The impact on the Cypriot economy

Invited by InBusinessNews to analyse the significance of Donald Trump's economic policies for the Cypriot economy, the partner at XPADIA Global Expansion Strategies was reassuring, explaining that due to the size of the economy and the very small number of exports, it is not expected to be particularly directly affected.

Indirectly, Teklos added, "as a member state of the EU and as a country based on tourism and shipping, the increase in tariffs and by extension inflation and costs to consumers may have some impact but it is expected to be limited and it is too early, again, to draw any in-depth conclusions."

(Source: InBusinessNews)