Michael Dell said on Thursday that a trade war with China or any other countries would be “mutually-assured destruction,” in response to a question about president-elect Donald Trump’s tax policies.
In a televised interview in Davos, Switzerland on Thursday with Bloomberg reporter Erik Schatzker, the founder and CEO fielded questions about how Trump’s policies might impact Dell Technologies.
The World Economic Forum takes place in Davos this week.
Trump was vocal on the campaign trail and in the days since about his desire to bring back more jobs and tax dollars from U.S. companies that have moved operations overseas. And Trump is reportedly considering new taxes on imports as a way to encourage more U.S. manufacturing.
Many of his ideas about trade and taxes would have a big impact on companies such as Round Rock-based Dell, which has dozens of offices in other countries and a massive overseas workforce. Much of the manufacturing of its hardware and component parts is done overseas.
Dell’s interview on Thursday was the first time he had spoken publicly since the election about the impact Trump might have on his company.
Dell said he was “very supportive” of efforts by Trump to offer tax breaks to induce companies to bring more of their operations back to the United States.
“I think you’ll see our company, companies like ours, across all industries bring capital back on to the balance sheet of the United States, which is likely to be a good thing,” Dell said in response to a “what if” question about Trump’s tax repatriation efforts. “We’re very supportive of that.”
Dell said about “half” of his business is overseas.
But when it comes to trade wars, Dell noted that the economies of countries like the United States and China are inter-connected, especially when it comes to the supply chain of companies such as Dell.
He noted that he could build more plants in the United States, called “final assembly plants,” but they would be “uncompetitive” without the “feed stock industries” like semiconductors and batteries.
And he pointed out that most modern manufacturing plants are becoming increasingly automated, meaning that even if there were more plants built in the U.S., it may not mean more jobs.
“If you go into one of our modern manufacturing plants, whether it’s in the United States or anywhere in the world, there are not as many people in those factories because of automation and productivity, which all of our customers are also applying across their businesses,” Dell said.
Here’s a full transcript of the Bloomberg TV interview:
Erik Schatzker: Dell is a company that relies, I think it’s fair to say, on open borders. Are you changing your assumptions for trade flows and business conditions with Donald Trump taking office as president tomorrow?
Michael Dell: We’re listening to understand what the new rules are going to be. Obviously we optimize our business based on whatever the rules are. As things move around and change, whether it’s in the US or around the world, we’ll make adjustments. What we see is a new administration that is talking about growth, and talking about infrastructure spending, tax reform, things that... repatriation, things that are pro-growth, so we like that.
Schatzker: Do you have a lot of capital stashed, well overseas profit overseas?
Dell: We have about half of our business outside the United states so certainly there are profits in those businesses. We invest $4.5 billion a year in R&D. Most of that is in the United States. But we’ll certainly understand what the new rules are and figure out how we continue to grow our business.”
Schatzker: I guess a better way of phrasing that question than saying overseas twice is to ask you, if they were to change the tax policy on repatriating these overseas profits, if it were a (small) amount, or if it were a holiday entirely, how much would you bring back to the U.S. from overseas?
Dell: I think you’ll see our company, companies like ours, across all industries bring capital back on to the balance sheet of the United States, which is likely to be a good thing. We’re very supportive of that.
Schatzker: Of what Donald Trump has said about trade, what would have the greatest impact on your business? I’m thinking the range of China to some kind of a tariff on imports or a tax on imports, to other things, if not eliminating, re-writing the rules of NAFTA. All of these things.
Dell: Ninety-six percent of the world’s population doesn’t live in the United States, so those are all potential customers for us, so we definitely want to have access to those markets. We don’t know what the rules are going to be. So we’ll have to wait and see. But generally a pro-growth administration is going to be quite positive.
Schatzker: CEOs I’ve spoken to here say they believe there is a real possibility — not probability — but possibility of a trade war with China. To what degree does that concern you?
Dell: I think any sort of a trade war would be mutually-assured destruction, certainly with China or other countries. So there may be some re-setting of the relationship in whatever form that takes. But, um, the interdependence of the economies with respect to supply chain and other aspects is quite high. The U.S. has had no industrial policy with respect to the feed stock for our industry. So while we have some plants in the U.S., we could build more plants in the U.S., without the key ingredients, the semiconductors, the displays, the batteries, which takes a long time and a lot of capital to build those industries, it... there’s a lot to do here.
Schatzker: Sounds to me like you’re giving it some thought.
Dell: Oh, for sure.
Schatzker: You mentioned manufacturing. It’s something, in addition to trade, it’s another thing that the incoming president feels very strongly about. You do some manufacturing int he United States. How many people do you employ and could you quote-unquote bring more jobs back to America?
Dell: Building a final assembly plant in the United States is actually quite easy. But that’s really not the point. The point is that without the feed stock industries, that plant...
Schatzker: Those components.
Dell: Exactly, those components. That plant would be uncompetitive. We need to have a thoughtful approach to those feed stock industries. It is also true that if you go in one of our modern manufacturing plants, whether it’s in the United States or anywhere in the world, there are not as many people in those factories because of automation and productivity, which all of our customers are also applying across their businesses.
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