Vice President JD Vance is on the road again to sell the Republicans' big new tax law
Vice President JD Vance is actively promoting the GOP's tax-and-border bill, dubbed "One Big, Beautiful Bill," with a focus on its benefits for American families and businesses. His tour includes stops in key swing districts, such as Canton, Ohio, and northeastern Pennsylvania, where he highlights tax deductions and new savings programs.
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Mint
22 minutes ago
- Mint
Why it has never been better to be a big company
For all the unwieldiness it entails, scale has always brought enormous benefits in business. Fixed costs are set against more revenue, raising profits and supporting investment. Heft brings greater bargaining power with suppliers and financiers. From the early 2000s, the advantages of scale became even more pronounced. Intangible assets, including software and intellectual property, gave the upper hand to companies that could afford to invest in them. Globalisation provided big companies with more room to grow, as well as access to larger—and cheaper—pools of labour. In America, the gap in profitability between big and small firms widened (see chart 1). Economists began to speak of 'superstar" firms racing ahead of the competition. Now size is conferring advantages in new ways. Artificial intelligence (AI) is reinforcing the dominance of big firms over small ones. So is the presidency of Donald Trump, which has raised the importance of resilience and political sway. Yet these same disruptions could spell danger for America's corporate giants. Already companies from Apple to Walmart are discovering how their size can make them a target of Mr Trump's wrath. Start with AI. You might imagine that lumbering leviathans would be too tied up in bureaucracy to make use of the technology. In fact, their scale allows them to invest far more in it than smaller rivals. According to a survey in December by Bain, a consultancy, American companies with more than $5bn in revenue had an average annual budget for generative-AI projects of $27m, five times the level in the preceding February. Those with between $500m and $5bn in revenue, by contrast, had set aside $9m, up by two-thirds over the same period (see chart 2). JPMorgan Chase, America's biggest bank, says it has rolled out AI tools to most of its 320,000 employees. UnitedHealth, the country's biggest health insurer, claims to have 1,000 different applications for the technology. Sanjin Bicanic of Bain notes that getting AI to work well is proving more expensive than for other types of digital technology, as it requires companies to organise their data and tinker with models. Big firms have the added advantage of larger data sets that can be used to refine the AI systems they build. It is not only technology, but politics, too, that is making it even better to be big. Although many of Mr Trump's tariffs now face legal uncertainty, those that remain will hammer sales and profits for businesses. Big firms, though, tend to be more resilient to such shocks. Among listed American firms, those in the top quintile by revenue have fatter operating margins and a healthier ratio of debt to operating profits (before depreciation and amortisation) than the average, and hold a lot more cash, too. That means they are less likely to get into financial trouble during a downturn. It also allows them to bounce back more quickly, as happened following the covid-19 pandemic. We examined the profitability of listed American companies, as measured by their return on invested capital, in nine non-financial sectors before and after the pandemic. For seven of the nine, the biggest firms—those in the top quintile by revenue—were, on average, more profitable across 2023 and 2024 than they were across 2018 and 2019. The bottom quintile, by contrast, became less profitable in the same number of sectors. Bigness tends also to bring increased supply-chain resilience—just as important in a trade war as it was amid covid-19. 'During the pandemic, I kept getting calls from small and medium-sized businesses saying that they could not get shipping capacity. The big companies were, by and large, at the front of the queue," says Philip Damas of Drewry, a shipping consultancy. Such prioritisation pays when companies are rushing to import products into America before tariff deadlines. It helps, in addition, that big companies tend to have more suppliers in more places. A study by the World Economic Forum and Kearney, a consultancy, found that firms which grew their market share in the wake of the pandemic were more likely to have back-up suppliers in a variety of countries for a significant share of the products they procured. Last, with scale comes an increasingly valuable asset: political capital. We examined data from OpenSecrets, a non-profit organisation, on the lobbying activities of American firms in the S&P 500 index. The median company in the smallest half of the index by revenue spent nothing on lobbying in 2024, relying solely on groups such as the US Chamber of Commerce to champion its interests. The median firm in the top quartile, by contrast, spent $3.3m on lobbying, five times as much as for the next quartile and twice as much as a share of operating expenses (see chart 3). It also hired a greater number of lobbyists relative to its number of employees. Mr Trump likes to talk directly with the bosses of many of America's largest companies. In April those of Home Depot, Target and Walmart, three retail giants, met the president to discuss their concerns over tariffs. Smaller retailers have received no such attention. Mr Trump seems particularly receptive to firms that promise to invest large amounts in America. 'So many companies want to come to the White House...[They offer] $10bn or more and I am there," he said in a speech in February. Such direct access is even more important than usual, notes Jorge Guajardo of DGA, a political-advisory firm, because many mid-level positions in the administration have still not been filled. All this helps explain why, since Mr Trump's inauguration, the Russell 2000 index of America's smallest listed companies is down by 11%, compared with a drop of only 3% in the S&P 100 index of America's largest firms. Yet the shifting business landscape also presents dangers for corporate giants. As with all new technologies, incumbents that are too timid in using AI will be exposed to newcomers that have built themselves around it. Then there is the risk that Mr Trump's tariffs result in a lasting reversal of globalisation which limits companies' access to foreign markets. That scenario would hit big companies harder than small ones. America's top quintile of listed non-financial firms by revenue derive 23% of their combined sales abroad, compared with just 7% for the bottom quintile. More attention from politicians may not always be welcome, either. Walmart recently angered Mr Trump by suggesting on an earnings call that it would need to raise prices in response to higher tariffs. Or consider Apple. In April the iPhone-maker won a partial reprieve from tariffs on Chinese-made smartphones. Two weeks later it said that it would shift the production of its America-bound iPhones to India. Mr Trump was not pleased. On May 23rd he threatened a tariff of 'at least 25%" on iPhones sold in America but made elsewhere. Even if the courts make Mr Trump's tariff threats toothless, he has plenty of other means at his disposal to make life difficult for companies. America's corporate giants have enjoyed super-sized advantages. They should be prepared for some super-sized headaches, too. To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter.
Mint
22 minutes ago
- Mint
Demand for American degrees is sinking
SOME OF AMERICA'S most valuable companies were built by people who came to America as students. Elon Musk was born in South Africa and lived in Canada before studying physics at the University of Pennsylvania. Patrick and John Collison moved from Ireland to attend MIT and Harvard, respectively, before founding Stripe, a digital payments company. All told, more than half of America's billion-dollar start-ups were founded by at least one immigrant; a quarter have a founder who arrived as a student. That pipeline of talent is now under heavy pressure. On May 22nd the Trump administration abruptly stripped Harvard University of its ability to enroll foreign students. A judge blocked the move the following day. But the administration only tightened its squeeze: on May 27th it suspended all new visa interviews for foreign students hoping to study in America. Officials say the pause is temporary. The damage might not be. Attracting global talent has long been one of American academia's greatest strengths. The country draws more international students than any other; over the past two decades the share of foreign students has nearly doubled, reaching almost 6% in 2023 (see chart 1). Most pursue degrees in fields such as science, engineering and maths. Nearly a third come from India; a quarter from China. America's top private universities attract the lion's share of foreign talent (see chart 2). International students make up 14% of the intake at the country's 158 most selective research institutions—more than double the national average. At the dozen 'Ivy-plus" universities—including the Ivy League and peers such as Stanford and MIT—the share reaches 28%. Columbia and Harvard, two institutions that President Donald Trump has recently targeted in his broader assault on elite universities, rely heavily on international enrolment, at 40% and 28% respectively. Public universities, although less exposed in terms of headcount, face other risks. They tend to depend more on foreign tuition, which is often several times higher than the rates charged to local students, and lack the endowments that cushion private institutions. Prospective students are already looking elsewhere. Studyportals, an online directory for degree programmes around the world, says clicks on American courses are now at their lowest level since the covid-19 pandemic (see chart 3). Weekly page views halved between January 5th and the end of April. First-quarter traffic to American undergraduate and master's degrees was down by more than 20% year on year; traffic to PhD courses fell by a third. The biggest drop was from India, where interest fell by 40%. The data suggest that British universities would be the most likely beneficiaries. The financial stakes are high. In the 2023-24 academic year foreign students added $43.8bn to America's economy, according to the National Association of International Educators, a non-profit—mostly in Democratic-leaning areas (see map). They also supported jobs at universities and in other sectors, such as food services and health care. But the heaviest cost to America will be in talent. Around three-quarters of international PhD students say they intend to stay in America after graduating. Blocking the next generation of students may punish the Ivies. Over time, though, it is America's edge in science, business and innovation that will suffer.
Indian Express
24 minutes ago
- Indian Express
With Aug 1 deadline looming, India's faces a trade predicament: to accommodate Trump's hardball tactics while maintaining tariff advantage
With less than a couple of days left for the August 1 deadline that the Donald Trump administration set itself to thrash out deals with its trading partners, the American President said he is planning tariffs for 'the rest of the world' at 'somewhere in the 15 to 20 per cent range'. That would mean a significant increase on the 10 per cent 'baseline' tariff that currently applies to most trading partners. India's talks with the US for an interim deal are in a limbo of sorts, given the lack of a significant breakthrough so far. As things stand, three things are clear: the US is pushing for zero duty access to the Indian markets, like the deals it has got with Vietnam and Indonesia. That would, however, be a tough demand for India to accommodate. Secondly, from its perspective, New Delhi is pushing for a headline tariff number of around 15 per cent for its goods going into the US, like what was offered by the Americans to the EU and Japan, with the comparative tariff advantage starting to diminish if the tariff starts to go over figure and inch up closer towards the 20 per cent mark, or even higher. Also, going by the deals signed by the US so far, the tariff scenario for each country seems to be dependent on multiple external factors as well. This includes investment commitments and promises on directional shifts in trade in goods that America is keen to peddle. The Trump administration is learnt to be pushing for India to commit to specific purchases and investments, of the sort that it got the EU and Japan to sign up for. The commitment for purchases should not be a big issue for India, given that Trump is ostensibly focused on extracting a big figure that runs into billions of dollars, without even bothering to specify the time-frame for achieving these targets. The full texts of the deals for both Japan and the EU are not out, and are unlikely to be out anytime soon. India has comminated its openness to purchasing three big-ticket items from America: defence equipment, natural gas imports and nuclear reactors. Cobbling together a big number might not be a difficult task. Agri and dairy, two contentious issues, are likely off the table for now, which is positive for New Delhi. Also, with the UK deals, India has shown a willingness to be flexible on segments such as opening up public procurement. That gives some headroom for Indian negotiators for the final push. Indications are that a sixth round of talks between the two negotiating teams is expected to take discussions forward mid next month. What could be instructive is the limited takeaway from the Japan deal: how the Japanese negotiators managed to upstage their American counterparts by getting an immensely favourable deal on automobiles, even as they dangled the agri market access concessions and Tokyo's investment pledges as distraction the entire time. While India's trade deal with the US is likely to be less focused on sectors and more focused on the headline number unlike its UK deal, New Delhi is likely to push for market access in labour-intensive sectors, while trying to ensure a significant tariff differential compared to its Asian peers. Now, if the final headline tariff offered to India by Washington DC is between 10 per cent and 15 per cent, the tariff points offered to the UK and Japan, New Delhi should have reasons to be satisfied. The advantage starts to taper off once the tariff goes over 15 per cent and inches up closer to 20 per cent, as was offered by the US to Vietnam. A transshipment clause, of the kind slapped on Vietnam, could be a problem for India, given that a lot of Indian exports have inputs and intermediate goods in sectors such as pharma, engineering goods and electronics coming in from outside, including China. Also, clarity on the final American duty offer on China is a number that negotiators will be looking at, given the implicit assumption in New Delhi that the Trump administration will maintain a tariff differential. For Indian negotiators, other tariffs, over and above the baseline tariffs and the sectoral ones on steel and aluminum, is an added complication. Sectoral tariffs such as the 50 per cent on steel, aluminum and copper are already impacting India's exports to the US, and Trump's threat of steep tariffs on BRICS countries over them buying Russian oil is a looming concern. Will that be neutralised in the agreement is a question. Another question for New Delhi is: in the absence of any kind of interim deal, should it brace for an eventuality where there may not just be 26 per cent reciprocal tariffs, plus a 10 per cent additional BRICS tariff as well? That's perhaps the absolute worst case scenario, till an agreement is achieved. A tariff in the 15-20 per cent range would mean India still compares reasonably well with Indonesia (19 per cent), Vietnam (20-40 per cent) and has an advantage against China (30-34 per cent) and Bangladesh (35 per cent), without the additional BRICS tariff being factored in. Meanwhile, as the uncertainty continues, India's exporters are struggling to navigate the way forward because the buyers are not clear as to what the final tariff is going to be, and are consequently holding back on placing orders. The higher tariffs that the US has imposed on China means a number of Chinese manufacturers are now rerouting shipments to Europe at throwaway prices, which is impacting India's exports to the EU as well. India, like other countries, had frontloaded a lot of shipments ahead of the reciprocal tariff deadline for the ongoing Spring-Summer season, but a big question mark looms over the Fall-Winter season spanning October-March. Once the official level discussions wrap up by mid next month, there is a sense that a final call on the deal could come down to a conversation between the two leaders, Prime Minister Narendra Modi and President Trump. This is especially so since the American President is the trade negotiator-in-chief in this entire tariff rationalisation exercise. A firm commitment from India to purchasing American defence equipment, natural gas and nuclear reactors, alongside some kind of guidance on India cutting its purchases of fossil fuels from Russia could be part of the final offer from New Delhi. Trump needs to be convinced of a deal that he can hard sell as a victory to his base. The best case scenario for India would be to get a deal of some sort now, and then build on that in the future negotiations that could run into 2026. For Trump, another growing consideration could be the fact that higher tariffs are making it nearly certain that American households will pay higher prices for the everyday goods that are made overseas and imported into the US. Inflation is a looming reality. A Yale estimate from July 23 found that the tariffs will result in as much as $2,700 in 'lost annual income' per household, though the taxes collected would potentially help narrow the long-running federal deficit. The tariffs that have kicked in so far are bringing in some money into the US Treasury, with tariff revenue pegged at $27.2 billion in June and $22.8 billion in May, according to the Treasury Department's monthly statements, a sharp increase from earlier years. Anil Sasi is National Business Editor with the Indian Express and writes on business and finance issues. He has worked with The Hindu Business Line and Business Standard and is an alumnus of Delhi University. ... Read More
