To answer your question…just because. It may be shocking, but there really isn’t a rational explanation. It’s amusing to listen to his supporters explain what’s going on. Here are some quotes from Senator Ron Johnson:
“Trade is an incredibly complex issue. Hard to say exactly how this all ends. This is something President Trump has believed for decades. He is absolutely dedicated to it. I think it’s a reasonably high risk. It’s a very bold move. He will either reap the rewards or suffer the consequences.”
“He also ran saying the tariff is the most beautiful word in the English language. This should not be unexpected. This is a core belief of his. And we’re going to find out to what extent he’s right and many people are wrong.”
I’ll take another shot at answering your question:
Stupidity + moral depravity + nihilism = current state of affairs.
The when is two years from now. The “how” is unlikely but possible. The D’s would need to win control of the House and either gain a veto proof majority in the Senate, or a Senate majority joined by enough Republicans who aren’t afraid of lame duck president.
At that point, Congress can use its constitutional power (Article I, Section 8) to set tariffs.
Then you have the ones who fall and go under. So you really need to know what you are investing in and how much you want to make. If you want to get the market return go Index. If you want to get a higher return go with growth.
I still own CSCO. It’s paying a dividend and making money. Capital gains taxes on a sale are too much to bear.
And then you have Eli Lilly. Went nowhere for 30 years, and now it’s another DELL. I’ve learned over time that when I sell something, it usually gets replaced with something worse.
The 30-year return on my portfolio is still beating the S&P 500, but like Warren Buffett, I’ve been “reverting to the mean” over time. Such is life.
Everybody needs to understand their limits. I had a baseball coach that taught me to kneel down and put my whole body in front of a ground ball. That way if my glove missed the ball my body would knock it down and keep the ball in front of me. I became tired of getting hit by ground balls in the in field so I learned to do what the pros did. Sure I missed a few but most of the time I caught the ball, it is amazing how your intuition and hand eye cordination will work together. Not everyone could do it, but you almost never see the pro’s kneeling in front of a grounder and putting their bodies in front of the ball.
Meanwhile, Stellantis has announced “temporary” shutdowns of it’s plants in Windsor, Ontario, and Toluca, Mexico. It’s possible they are simply overstocked on product from those two plants, or they are considering terminating the products built there: Pacifica minivan, Compass compact SUV, entirely.
VW has announced they are adding an “import fee” to the price at the dealer, suspending imports from it’s plant in Mexico (which accounts for 3/4th of the cars they sell here), and holding cars shipped from Europe (a trickle of GTIs) at port of entry.
I have been saying, in an automotive group on FB, that the chances of the VW brand being withdrawn from the US are non-zero. As usual, I have been dismissed as “nuts”.
I think it’s zero. I think that VW will (and should) assess that there’s a non-trivial chance that these tariffs are not permanent. So they wouldn’t withdraw the brand. They might seriously curtail new car sales, but they would not pull out of the market entirely - particularly since they have some manufacturing facilities in the U.S. already.
That would make it difficult for their dealers to stay in business. Contractually, VW is probably required to provide product, but, in this case, the company can probably plead “force majeure”.
There was some chatter, a month or two back, about VAG building Audi and Porsche models in the US. Audis carry a fatter profit margin, on a fatter price, and Porsche models carry an insanely high profit margin, on an insanely high price. (putting on MBA hat) it would make perfect sense to withdraw the low price, low margin, VW brand, and use the existing plant in Chattanooga to build much more profitable Audis and Porsches.
Yes, it would be difficult. But the Administration’s policy approach to tariffs has been so uncertain and chaotic that VW has to assume a decent probability that the tariffs will not last. So they have to keep their dealers afloat.
Sure - but again, the massive uncertainty counsels against doing that. If they knew they’d be facing these tariffs for certain for the next 3.5 years, it might possibly make sense to retool the factories to make different models. But unfortunately for them - and every other firm that’s affected by this - they have no way of knowing whether those tariffs will last 3.5 years or 3.5 weeks. Nor will they be in a rush to invest in physical plant in the face of a global recession.
Yep - and that’s the problem. No one really knows whether the purpose of the tariff is:
To be permanent, and thus generate revenue and provide economic incentives for companies to relocate production assets to the United States; or
To force other countries to zero out tariffs and take other steps to reduce trade barriers so that we no longer run a deficit; or
To generate some personal or idiosyncratic concession to the President or the U.S. that has little to do with either of the above.
So no one can plan anything. They don’t know whether dangling a check would cause tariffs to go away. They don’t know if the tariffs go away whether they would come back. They don’t know whether the Administration intends to keep the tariffs come recession or high water, but Congress might step in. And because the tariff plan was so ill-considered and untethered from reality, and because the Administration seems to relish unpredictability, firms can’t plan what they’re doing.
