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Billionaire hedge fund manager John Paulson has dismissed Wall Street concerns that President Donald Trump’s plans to impose higher tariffs will harm the economy, urging the US to “decouple” from China.
The Trump megadonor pivoted from his own earlier criticism of the Republican presidential candidate’s trade policy, saying “strategic tariffs” would be a valuable negotiating tool to create a “level” playing field.
“We’re not yet in the era of free trade,” Mr. Paulson told the Financial Times in an interview. “It’s very one-sided.”
“It’s precisely because Trump says these things that I respect him,” said Paulson, a Wall Street titan who has been tipped as a possible candidate for Treasury secretary if the Republican Party wins November’s presidential election.
“He may not always express it well, but when I listen and look into it, I find that what he says is absolutely right,” he added.
President Trump threatened this month to impose 100% tariffs on imports from countries that stop using the dollar.
Some economists have warned that higher tariffs would hurt consumers, slow growth and spur inflation.
of Tax Foundation Republicans in Congress who support lower taxes and streamlined laws say Trump’s formal proposal to impose 60% tariffs on Chinese products and 10% to 20% tariffs on most other imports would increase costs for U.S. businesses and shrink the economy.
Paulson’s comments contrast with those from April, when he said tariffs were a “blunt tool” to correct trade imbalances and that he “doesn’t want to decouple from China.”
In an interview this week, he said Beijing was “becoming more hostile towards the United States” and was driving foreign investment out of China.
“Economic decoupling is certainly happening,” Paulson said. “I think there is a desire and a need for decoupling from China.”
Mr. Paulson, who made his fortune as a short seller before the housing market collapsed in 2008, had previously subscribed to “economic orthodoxy” that free trade benefits the world, but said trade was “not being conducted fairly.”
Paulson said one of his investments, Steinway Musical Instruments, faced a 30% tariff for selling woodwind instruments in China, but that the U.S. levies just a 3% tariff on such instruments.
“I experience this every day,” he said. “We are devastated.”
“Other companies that I work with have plans to close their U.S. factories and move them to Mexico or overseas, and it’s getting to the point where that will have a major impact on us,” he added. “We need to stand up and protect our U.S. manufacturers.”
Asked about Trump’s promise to carry out the largest deportation drive in U.S. history, Paulson said the former president would implement his plan in stages. “I believe in immigration, but I believe in fair immigration,” he said. “I fully support deporting criminals.”
Paulson sharply criticized Democratic presidential candidate Kamala Harris’ plans to raise corporate and capital gains taxes, as well as a proposed new tax on unrealized gains for people with a net worth of more than $100 million.
“The confluence of these factors would undoubtedly lead to a market crash and an immediate economic downturn,” he said.
Despite talk of a possible Treasury Department position, Paulson said it would “not be that easy” to get a government post because of his financial holdings.
One potential conflict of interest involves preferred stock for Fannie Mae and Freddie Mac, the government-sponsored organizations that guarantee most U.S. mortgages, and Mr. Paulson has argued that the companies should be returned to private ownership.
As a shareholder, he stands to gain from the sale.
“Now they’re in a position to be liberated,” he said of the mortgage giants. “They can stand on their own and become private companies, with enough capital to support the housing sector.”
Paulson argued that a Trump presidency would boost natural gas production, boost manufacturing and make government more efficient. The Republican candidate has said he would appoint Elon Musk to chair a committee to audit the administration and make “radical changes” to regulations.
