Dear Financial Voice Reader,
So will tariffs mean problems for the markets? Not really. I know it is surprising. You see tariffs do impact businesses, but not so much consumers. Tariffs are also easy to bypass, you just do what Harley is doing, move production to Europe from America. That’s the exact opposite of what Trump wanted.
You want to see outside interference in US elections. Well in November there is another election and Europe is targeting tariffs on companies and products in marginal constituencies. When Harley moves jobs to the Europe or India to avoid tariffs, who are those employees going to vote for? Not Trump.
Of course economics is hard. Some people don’t get it. Sometimes even economists don’t get it. And Presidents for sure don’t get it. Tariffs are like punching yourself in the face. They are a tax on your people for buying goods from another country. Your own people pay a price.
For instance America now punishes through higher tax people buying certain goods from India. Nice eh! So, after America punched itself in the face, India punched America, with China and EU too, by taxing American sellers of certain goods. So tariffs led to America getting punched twice in the face, once by itself, and then by the other countries. It’s like going into a pub of rival supporters and picking a fight because you claim your team was unfairly treated. You don’t get to win the next game, you just get punched even more. Don’t get me wrong, the American President understands psychology, he won a minority of the popular vote to take the White House after all – or more accurately, outmanoeuvred every Republican and the FBI did the rest on Hilary.
So what of stocks. Well, listed companies suffer more from tariffs than the consumer because of size and scale. Consumers have the cost spread among all of them. So who suffers? The employee. The poor worker. Not the steel maker – they’re fine. It’s job redistribution from one industry to the other. Steel comes to America, and Bikes go to Europe.
And that begs another question. You’d think you would have tariffed software companies not steel! Its not 1880 for goodness sake. Yes, makes you feel good, big steel plant, hankering to the past – but that the problem – it’s psychology, quick impact not long lasting. Then again, Trump is about now, not tomorrow.
Alpesh B Patel
For a free online trading course visit www.alpeshpatel.com
