Looking Backwards …
LB #1
It has been an eventful first two weeks of Don’s new America. We have had air traffic controllers being offered buyouts of their contracts, two plane crashes in the next few days, and now the FAA main system is down. This according to the New York Times’ Mike Ives, “The primary NOTAM system is experiencing a temporary outage, but there is currently no impact to the National Airspace System because a backup system is in place,” Transportation Secretary Sean Duffy said on social media.
Mr. Duffy was referring to “Notice to Air Missions,” the alerts that the F.A.A. uses to share information about hazards in the air or on the ground, such as closed runways, airspace restrictions and navigational signal disruptions.”
Now normally we could talk about whether this was Trump’s fault or Biden’s fault for favoring DEI considerations over competence or we could even talk about more cables being cut in the Balkans and there was, but today we need to discuss this trade war with our neighbors and best trading partners.
So, the friendly skies are less friendly and so it seems is our relationship with our best trading partners. Trump announced 25% tariffs on Canada and Mexico and 10% tariffs on China. As I like to say, and away we go. Here is a list of items to be affected from Augusta Saraiva, Enda Curran, and Raeedah Wahid at Bloomberg, “About half of vegetables and 40% of the fruits the US imports are from Mexico. On top of supplying over 90% of the avocados Americans eat, the Latin American country is the top foreign provider of bell peppers, cucumbers and squash. Alcoholic beverages accounted for nearly a quarter of all US agricultural imports from Mexico in 2023. Four in five beers that enter the US from abroad come from south of the border, so do half of all hard liquor the country imports — mainly tequila and mescal. Canada is also a top supplier of distilled spirits including liqueurs and whiskey. Nearly half of US imports of auto parts come from Canada and Mexico, and American brands are particularly reliant on those products. When it comes to specific products like air bags and seat belts, nearly 80% of the ones the US import come from its North American neighbors. In addition to that, half of US imports of assembled cars come from the two countries…In the worst-case scenario, when shoppers don’t substitute for US-made goods and 100% of the tariffs is passed onto consumers, the potential economic impact could work out to roughly $835 per person, or $3,242 for a family of four, according to ING estimates based on the latest quarterly trade data.”
So which automaker is likely to benefit from this interruption? Would his first name rhyme with Felon and last name rhyme with Tusk? I guess that $290 million investment to Trump continues to show dividends. Legacy automakers have had 25 years of factory production, free trade agreements, and in 25 days decades of capital planning go out the window. If you think global companies are going to invest capital with this chaotic Trump/Biden/Trump/Biden again political philosophy, think again. Companies are looking at a much longer time frame than 1-2 years. Why 1-2 years because of this from Jacob Lorinc, David Welch, and Amy Stillman at Bloomberg, “Car components can make their way back and forth across US borders as many as eight times during production, heaping duties onto a sprawling industry that relies on materials from all three countries. At the consumer end of the supply chain, the average price of a new car may climb by about $3,000, Wolfe Research analysts have said, further straining affordability with prices already close to all-time highs… “We’re talking about thousands and thousands of jobs being lost,” said John D’Agnolo, the president of a local union representing workers at Ford Motor Co.’s engine plant in Windsor… “We’d truly be a ghost town, here in Windsor, if we lost this type of business.”
Ontario Premier Doug Ford has warned that more than 500,000 jobs may be lost just in Canada’s most populous province, many of them in the auto sector. General Motors, the largest US carmaker, has said it wouldn’t move production unless the company can be sure it makes long-term sense.
“We are working across our supply chain, logistics network, and assembly plants so that we are prepared to mitigate near-term impacts,” CEO Mary Barra told analysts on Jan. 28. “Many of these actions are no cost or low cost. What we won’t do is spend large amount of capital without clarity.”
If fruit and vegetables prices rise by 25% and cars rise by 25% and inflation rises by 7 tenths of one percent which seems to be the consensus, what do you think the American public is going to think about this new administration? Do you think Americans are just going to take spending $3,000 more at the store and say thank you Don?
If Don thinks tariffs are the answer, I say let’s see. We haven’t played this game since the Smoot Hawley tariffs caused or contributed largely to the Great Depression. Perhaps it is different this time. However, what I see more concerning is the outrage of the entire world at the US. Our best trading partners and neighbors now are furious.
LB #2
How has Canada responded, they will be instituting tariffs on us and Ontario Premier Doug Ford has pulled all American alcohol from the province according to Christine Dobby at Bloomberg. “Retail outlets of the Liquor Control Board of Ontario will take American products off shelves on Tuesday, the day the US tariffs go into effect, Premier Doug Ford said in a statement Sunday. The LCBO, which is the only wholesaler of alcohol in the province and sells almost C$1 billion ($688 million) in American wine, beer, spirits and seltzers annually, will also take US products out of its catalog, he added, so other retailers and restaurants can’t restock those items.”
I guess America being great again doesn’t apply to reverse tariff casualties. We have the tit for tat beginning. Notice how Trump only put a 10% tariff on Canadian oil. Remember, Canada, Mexico, Venezuela which is out, and Colombia are where we get our oil imports from. Canada has already implemented a bathroom tax across Canada for Americans as it is now official Canadian policy not to take any shit from Americans.
Canadian alcohol market closed
LB #3
Now it seems that this tariffying situation is going to hurt the Canadians, Mexicans, and the American people. The question is will it be worth it? Trump has assumed this executive power by declaring a war on drugs continuing Nancy Reagan’s fight from 40 years ago. He claims fentanyl is the reason why he gets the power to wreck industries and trade relations. The border has been quiet so it seems that it might be working. This from Steve Watson at Modernity News “Fox News reporter Bill Melugin published a post Monday outlining how he has never seen anything like what is happening at the border since President Trump took office a week ago.
“Per sources, Border Patrol recorded just 582 illegal crossings at the southern border yesterday, with not a single one of the nine sectors hitting 200. I’ve never seen anything this low in all of my border coverage,” Melugin urged.
He continued, “The numbers were already flat/low in Biden’s final week, bouncing between 1,200-1,400 illegal crossings daily, but the numbers have been falling off a cliff since Trump took office. Would you believe it, it turns out that enforcing the law at the border actually works!”
This is excellent news. We live in a society of laws, and we have laws that if on the books should be enforced. We do not want nor need immigrants without skill sets that better the United States of America coming to this country. Chalk this up to a win for Trump early.
The only problem I see, is that we have laws against doing drugs and that hasn’t seem to have deterred users of these drugs which aren’t being deported. Americans use 80% of the world’s illegal drugs. Unless we start deporting Americans, I don’t see what has changed on the war on drugs. What I do see is a vision, ohh C Thomas tell us the future, it is unclear and cloudy but I’m having a vision, a vision from the future. It’s a headline in the news. It reads, let me put on my glasses so I can read it, it says, with fentanyl imports down more Americans have turned back to using meth. Ok, good talk. Fix the problem not the symptoms.
Looking Forwards…
LF#1
To a nation with more meth use in its future what else will there be? It seems a lot of real estate for sale and I mean a lot. This from Wolf Richter at Wolf Street, “In the South – the largest region, with a population of 133 million, see map below – has the most inventory of new houses ever, surpassing even the astronomical levels on the eve of the Housing Bust, just before it all fell apart.
Since June 2024, new houses for sale in the South have surpassed the high of August 2006. In June, there were 293,000 new houses for sale (compared to 291,000 in August 2006). Since then, the inventory of new houses for sale has further ballooned and in October reached 304,000, and has remained in that range through December (301,000). Since December 2019, inventory has exploded by 76%. This is a massive amount of inventory of new houses for sale.
In the West – the second largest Census region, with a population of 80 million – a similar problem is piling up. Inventory of new houses for sale surged to 119,000, the highest inventory since December 2007, not far below the peak in June 2007 early on in the Housing Bust, and up by 35% from 2019. But sales have been anemic in the West because prices are way too high. In 2024, a total of 157,000 new houses were sold, down by 28% from 2020, and down by 14% from 2019.”
LF#2
The Wolf wasn’t done exploring the current situation in housing as it gets worse. “The DOGE people in the Trump administration are considering shedding a big portion of the massive office space that the government owns or leases nationwide, managed by the General Services Administration (GSA), including selling two-thirds of the office space the government owns and terminating three-quarters of the leased office space, according to the WSJ…The office sector is already in a depression, with default rates that exceed those during the worst moments of the Financial Crisis. Putting this inventory on the market for sale is going to weigh on the already collapsed prices of older office buildings – prices of 50-70% below the last sale before the pandemic are now common.
And terminating leases is going to stress office buildings, their landlords, and their lenders even more, likely entailing more defaults and foreclosure sales. This is a much needed but very bitter medicine to alleviate government waste. Here are three stats to make it real. “GSA pays $5.2 billion in annual rent to private-sector landlords. In the vast Washington DC metro, GSA leases nearly 10% of the entire office market, 35.8 msf in 446 buildings, and can terminate 9.6 msf of that in 2025. GSA leases nearly 6% of the office space in the Kansas City metro (DoD, USPS, Treasury, VA, and USDA), 4.3 msf, of which it can terminate 1.0 msf in 2025.”
It is already a depression in commercial real estate, and this will make it worse, and it is likely as DOGE sheds dead weight.
LF#3
There is a lot to unpack in this week’s LBLF, but I saved the best for last. This from ZeroHedge, “As fully expected, the EU is looking at options to restore Russian natural gas flowing into Europe (and even presumably via Ukraine), discussions which have of late taken on more urgency given Ukraine’s front lines are collapsing and a deal to end the war is looking inevitable, but whether something takes shape sooner or later remains the big question.
EU officials are mulling resumption of purchases of Russian pipeline gas which could be part of any potential settlement to the war, Financial Times has reported, citing unnamed sources. The outlet stated that advocates of such a ‘controversial’ plan, which includes Hungarian and German leaders, state that this could be an underlying incentive to maintain peace – the stability of Europe’s energy market.
“There is pressure from some big member states on energy prices and this is one way to bring those down, of course,” one official told the FT. And separately a senior EU official acknowledged that “In the end, everybody wants lower energy costs.”
Pushback on the political front is going to be strong, and the argument will be made of ‘appeasing Russia’ and ‘abandoning Ukraine’ – and of allowing more revenue for Moscow’s war machine. Per the FT:
Floating the resumption of pipeline sales from Russia has infuriated Brussels officials and diplomats from some eastern European countries, many of whom have spent the past three years working to reduce the amount of Russian energy being imported into the bloc. “It’s madness,” said one of the officials. “How stupid could we be to even think about that as an option?”
…Or they could just be looking out for the interests and energy needs of their own respective populations.”
What a great line…There is a chart in this article that also backs up the tweet that ZeroHedge made on Jan.1, 2025 which read “Europe has gone from relying entirely on cheap Russian gas to relying on expensive US LNG.”
How long have we been asking about this very topic? Over and over and over again because it doesn’t make any god demanded sense what they are doing. Now, Europe has another great big problem, about 6’4”. Trump said if they didn’t buy even more energy from us, he would institute tariffs on European products. Now why would they buy more expensive gas from the US? I would say this…We will take our savings on energy Don, drink our own wine and let you drink that shitty Californian wine to your heart’s content. Why don’t they buy Canadian energy? I hear Canada and Mexico oil just went on sale by 25%.
This is where I get really nervous. Don is making enemies of everyone on the planet right now. If we were in 1946, that might be different. We had the bomb, all the gold, all the manufacturing, and the only country not torn up by war that was of any size or scope. We could make the rules then and we did. Now, the world owns almost a quarter of our debt, they produce most of the items that Americans buy, and our military can’t control the Red Sea, goat herders in Afghanistan, Iraqis, or Charlie in Vietnam. We aren’t in a position of strength. We are in a position of relative strength versus any other one country mano a mano but us against the world? No chance, and we are turning ourselves into the heels of the planet. This is what happens with Obama, Trump, Biden, and now Trump again. Our ego is writing checks are bodies can’t cash.
Sincerely Yours,
C Thomas Printer
The Dow Jones finished trading …at 44,544.
The 10-year Treasury bond is at …4.54%
The price of Brent Crude is … at $75.67 per barrel.
The price of gold is … at $2,835/oz.
The price of silver is … at $32.26/oz.
I leave you with this from the information superhighway, I shot the tariff, but I did not shoot the subsidy.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.