Looking Backwards …
LB #1
“Stroke of the pen, law of the land. Kinda cool.” Paul Begala
Ron Paul, Rand Paul’s father, tells the story of Paul Begala’s reaction to executive orders while working for President Clinton as a political adviser. In fact, Paul writes in his book End the Fed, “Begala, of course, was ecstatic over the remarkable shortcut for passing laws by keeping Congress from interfering with the legislative process.” Well, the founding fathers went to a lot of work to put the legislative function of the government into the hands of a bicameral body and away from a tyrant like the King they had just rebelled against. So, whether its Clinton, in this case, Biden or Trump I don’t like to see the executive order being used or should I say abused. On Wednesday Donny Trump imposed a 25% tariff on all cars not built in the United States by executive order. He said it would be permanent. We have learned to not believe a word he says, but let’s assume there will be no carve outs, and take him at his word despite his penchant for flip flopping like a windshield wiper.
Most analysts are saying this would add about $10k-$15k to each car and we will get to the math. This from David Welch, Gabrielle Coppola, and Josh Wingrove at Bloomberg, “ Donald Trump’s planned tariffs on auto imports will hurt carmakers around the world and push up prices for US consumers. Among the many losers, one winner stands out: Elon Musk’s Tesla Inc… “There are very few winners,” Sam Fiorani, vice president of global vehicle forecasting for AutoForecast Solutions, said in a telephone interview. “Consumers will be losers because they will have reduced choice and higher prices.” … Still, Musk says that Tesla won’t go entirely unscathed.”
Instead of saying the traditional two words I would use I would like to say bull plus the contents of the basement of an outhouse.
This from Alex Harring at CNBC, “Several analysts on Wall Street see a clear winner emerging from President Donald Trump’s new auto tariff policy: Tesla… Put simply: “Tesla wins, Detroit bleeds,” wrote Bernstein analyst Daniel Roeska in a Thursday note to clients… Roeska called Tesla the “clear structural winner” of the policy, adding that it has a localized market share and is “better insulated” from trade risk. On the other hand, he said Ford and General Motors could see declines of up to 30% in earnings before interest and taxes this year… Ford’s stock declined more than 3%, while GM shares plunged more than 7%. Stellantis stock fell more than 1%.”
If this was so good for America, how come the American automakers’ stock got wrecked? If this is so good for Americans then why did the S&P 500 close Tuesday around 5,800 and close Friday at 5,580, down 4% in 3 days? If you don’t buy a Tesla, you get a tariff. Is that the new policy? We have had commercials to sell Teslas the last two weeks with Trump on the White House lawn and then Lutnick on Fox News and now we are just adding a surcharge? Never forget that Musk gave Don $288 million dollars. That money has more strings than Tampax.
These were just the auto tariffs though, the reciprocal tariffs are due to land on Tuesday, on what Trump is calling liberation day. Mike Shedlock explains it well at his site Mishtalk, “We’re going to make the External Revenue Service replace the Internal Revenue Service.” By “External Revenue Service” Commerce Secretary Howard Lutnick means tariffs… To balance the budget with tariffs, the administration would need to bring in $7 trillion. To replace individual and corporate income taxes, tariffs would need to bring in $3.1 trillion.
Tariffs brought in about $30 billion for the full year in 2024…Trump proposes $918 billion in “reciprocal tariffs” to make the trade deficit go away.
I would love to hear a detailed explanation of exactly how that works…We would need to faithfully collect 200 percent all tariffs on total imports ($3.3 trillion) with no trade frictions, no retaliations, and full compliance. Everyone will gladly pay (meaning consumers). Lutnick and Trump fail to understand tariffs are a tax on consumers.”
It is a tax on consumers, but it isn’t quite as simple as Mike explains because while the government gets the entire 25% the cost can be born by different parties. The exporter aka the foreign company can lower the price it sells at which would then be tariffed at 25% which would lower the total tariff collected. Let’s say there is a company that makes a product for export, and they have a 10% profit margin and the total price for easy math is $10 and an importer buys that product and also adds a 10% profit margin and the customer buys something for $11. The cost of the tariff if unshared by the two businesses would raise the price to $13.75 for the consumer. However, if both businesses said that they would lower their profit margin 10%, from 10% to 9%, then the price would be $13.49 or only a 22.6% increase for the consumer.
If Trump came out and said I’m going to tax each company 10% of their profits and the consumer 22.6% on every sale what would the reaction be? I’ll tell you what the reaction would be, the Boston Harbor would be full of tea bags. Currently, the average new car price is around $50,000 which would mean using the 10% new example the new car would be $61,600. So, no one will want to buy a new car at that price, they will just want to fix their old one. I hear that policy is working really well down in Cuba.
LB #2
This trade war is just ramping up though as that is just the impact on American consumers. Let’s talk about American businesses. Tariffs don’t happen in a vacuum. We can see Americans are going to be forced to buy less products because the government is adding a 25% tax. That will hurt foreign businesses by Americans buying less products. There will be a foreign response, and we are already seeing it from our nice neighbors to the north. This from Harriet Baskas at NBC News, “Trump’s escalating trade war against America’s closest allies and trade partners isn’t just rattling stock markets and drawing retaliation from Beijing, Brussels and Ottawa. It’s also fueling a backlash among ordinary consumers across the northern border. Two-thirds of Canadians said they’d significantly reduced their purchases of American products in stores (68%) and online (65%), and 59% said they’re less likely to visit the U.S. this year than in 2024, according to a survey last week by the Canadian market researcher Leger. Some 36% of Canadians with U.S. travel plans said they’d already canceled them. A separate poll this month by Montreal-based Approach Tours found even higher resistance among older Canadians, with three-quarters of respondents ages 55 and up saying they’re avoiding trips to the U.S. more than before.”
How is that going to help American businesses, restaurants, and hotels that are already going to be suffering from a decrease in domestic business because the domestic consumer has had to pay a 25% tax on cars or whatever else they might be buying and now that business is going to see a decrease in foreign travel? That will make American bankruptcy lawyers great again.
LB #3
So foreigners are boycotting American products and they are boycotting travel to America which will hurt American businesses and we have seen how buying anything imported which is all of our clothes, half our cars, most of Wal-Mart, etc etc etc. Since people shop at Wal-Mart for always low prices the consumer will now be forced to pay the tariffs or buy American products which will be higher priced. This means that the American businessman and woman will be dependent on the American consumer to carry their burden. Well, it turns out that isn’t likely.
This from ZeroHedge, “While investors and economists are squarely focused on whether the US stock market has bottomed or if this is just a short-squeezing bear market rally, and whether the US economy is still growing or – as the Atlanta Fed GDPNow tracker strongly hints – is rapidly shrinking, a far more troubling problem has emerged for the US economy and the Trump administration: the US consumer, and especially the lower income cohort, is now fully tapped out. Consider the following data from the Philadelphia Fed, which recently showed that the share of active credit card accounts making only the minimum payment hit a series high, 10.75% in third quarter 2024…In addition, more consumers are falling behind on their monthly card payments. The balance-based 30+ days past due rate increased 33 basis points year-over-year to 3.52% in third quarter 2024. This represents more than double the delinquency rate of 1.57 percent at the pandemic low in second quarter 2021…It’s even uglier when looking at the charge-off rates by such “less than prime” card issuers like Capital One and Discovery, both of which just hit their highest charge-off rates since the global financial crisis.” Not the pandemic when we shut the country down, back to the 2008 great financial crisis. I’ve been saying that Trump is doing this on purpose, but not even Trump can control how bad is too bad and I see that as a real threat right now. I’d start preparing like there will be a 2008 level crisis or even worse.
Looking Forwards…
LF#1
One of the Trump administration’s early wins seemed to be Blackrock securing the Panama Canal infrastructure with their purchase of ports from Hong Kong’s CK Hutchinson. This from ZeroHedge, “President Trump’s master plan to strengthen hemispheric defense—aimed at eliminating Chinese influence in the Panama Canal—appears to have hit a bottleneck at the end of last week.
A new report Saturday reveals that Hong Kong’s CK Hutchison will not sign a deal next week to sell its two ports on either side of the canal to a BlackRock-led consortium. It’s back to the drawing board for the Trump administration, which will now need to implement new tactics to pressure Panama to rid itself of Chinese Communist influence.
Sources told Reuters that Hong Kong billionaire Li Ka-shing’s deal to sell the Panama ports, including Balboa and Cristobal on either side of the canal, will not have the proper paperwork signed with the BlackRock-led investor group by the April 2 deadline for “obvious reasons.”… In another report, The Telegraph noted, “Chinese authorities have effectively blacklisted CK Hutchison and the business interests of the Li family by telling Chinese state-backed firms they will struggle to get regulatory approval for any work involving the group.”
We need to realign ourselves while we enter this trade war. Americans print money, China makes stuff. Who do you think will win? We run up debt to buy goods, but China has factories, they ship stuff that must be shipped, and they don’t have the entire world angry with them over tariffs. Who do you think the Panamanians want to do business with? The people who produce products to send through their canal or the people who want to steal their canal? We have to eliminate our American bias if we want to see this problem clearly. We are merely their best profit margin, if they make a product and don’t sell it to us, they can sell it somewhere else for less money which hurts their profit margins. If we can’t get vital imports and we have to build it ourselves, with our current debt situation, it could be catastrophic.
LF#2
Enough of the financial misadventures of the US for now, I want to share a story from Terry Cowen on Substack via ZeroHedge, “This is the most astounding thing I have heard of in a long, long time. It almost is too fantastical to believe. If it happened here in the US or West, it would be all over the front pages and on every newscast. Agents would be angling for the movie rights.
What am I talking about? Briefly put, 800 Russian special ops marched 12 km. (7.2 miles!) through an abandoned gas pipeline (in some portions crawled apparently), came out the other side, and in conjunction with other Russian troops, closed the trap door on Zelensky’s Kursk misadventure.”
They literally spent 4 days in the pipeline and came out and flanked the disorganized Ukrainians and recaptured a large part of the territory in Kursk. This needs to be made into a movie.
The Russians are slowly grinding the Ukrainians down just as predicted. The question now becomes what are they going to do? Are they going to get reinforced by Europe? It seems that way. Moving from one war to another…
LF#3
I bring you Jeffrey Goldberg at the Atlantic, “The world found out shortly before 2 p.m. eastern time on March 15 that the United States was bombing Houthi targets across Yemen.
I, however, knew two hours before the first bombs exploded that the attack might be coming. The reason I knew this is that Pete Hegseth, the secretary of defense, had texted me the war plan at 11:44 a.m. The plan included precise information about weapons packages, targets, and timing. This is going to require some explaining…This is where Pete Hegseth and I come in.
On Tuesday, March 11, I received a connection request on Signal from a user identified as Michael Waltz. Signal is an open-source encrypted messaging service popular with journalists and others who seek more privacy than other text-messaging services are capable of delivering…I accepted the connection request, hoping that this was the actual national security adviser, and that he wanted to chat about Ukraine, or Iran, or some other important matter.
Two days later—Thursday—at 4:28 p.m., I received a notice that I was to be included in a Signal chat group. It was called the “Houthi PC small group.”
That’s right, a journalist was included in all the war plan and targets of an attack on the Houthis hours before it took place. Jack Detsch, Paul McLeary and Eli Stokols write this for MSN, “The White House is publicly defending Defense Secretary Pete Hegseth after he texted sensitive military information in a Signal chat. But behind the scenes, administration insiders are starting to express doubts about the Pentagon chief’s judgment.
Officials agree national security adviser Mike Waltz, who accidentally invited a journalist to a group chat with senior leaders, could more easily take the fall for a scandal that has embarrassed the administration — which may end up sparing Hegseth his job. But Republican hawks, Pentagon officials and even some inside the White House now believe Hegseth also messed up by sending likely classified details from his phone. And that has the potential to undermine his credibility in the administration…And it follows other prominent stumbles, including a walk back of his February remarks about Ukraine war negotiations in Brussels and an ill-fated effort to send thousands of detained migrants to Guantanamo Bay.”
Yesterday the Wall Street Journal is reporting that pint-at-a-pub Pete brings his Fox News producing wife with him to meetings where sensitive information is discussed. Why is she there? Are war plans going to end up in the Jimmy Choo shoe chat next? Hegseth is not qualified for the position he is in, that is quite obvious, but frankly I don’t blame him, the only qualification needed is the approval of the President. There are few people that are louder yes men for Trump than Hegseth. He will tell Trump exactly what he wants to hear. That isn’t necessarily good, but a prerequisite for working for Trump. So this all points back to the wee orange man at the top. Like the economy, the military is obviously in a shaky position, hopefully it won’t get too bad…
Sincerely Yours,
C Thomas Printer
The Dow Jones finished trading …at 41,583.
The 10-year Treasury bond is at …4.25%
The price of Brent Crude is … at $73.63 per barrel.
The price of gold is … at another all-time high $3,118/oz.
The price of silver is … at $34.82/oz.
I leave you with this from the information superhighway, What do you call it when a snowman has a temper tantrum? A meltdown.
Thank you for listening today and you can find all of our articles and more on our website cthomasprinter.com.