“TARIFFS on Autos, Lumber, Pharma, and all other Reciprocal TARIFFS, from 15% to 25%.”
– President Donald Trump
Trump says it’s because they aren’t living up to their side of the trade deal:
- A pledge to invest $350 billion in the U.S. in things Trump said he would choose that would be owned and controlled by the U.S.
- Also to buy $100 billion of liquefied natural gas and other energy.
****** This makes me rethink tariffs a bit. So, I see Trump as acting with urgency because a ruling from the Supreme Court can happen any day now. My thinking is that Trump will stir the pot of tariffs as much as he can as a negotiation tactic until then (MEANING WE WILL HAVE MORE TARIFF THREATS IN THE NEAR-TERM, NOT LESS BECAUSE OF TIMING RISK).
But why does this make sense to do something that could potentially be reversed soon?
I believe this article is the main giveaway. There’s two sides to these trade deals usually:
- Tariff Rate (which can be reversed and potentially come back at lower rates we’ve talked about)
- Investment into the United States (tariffs can be reversed but the investments into the U.S. would be much harder to reverse. Once a company commits billions of dollars to plants, supply chains, goods, etc.. they’re more LOCKED IN!!!)
This entire time tariffs have been variable rates that move up and down. Thinking about the deals at hand:
Tariffs caused a pull forward effect for these companies to get a butt load of cash up front that they wouldn’t have otherwise. Then using some of that cash they can turn around (in exchange for lower tariffs) and give some of it back as a form of investment back into the U.S. and the foreign countries still have the upside available to them (because they’re in the form of investments). ******* This is something I will continue to think about and theorize how that can impact things… just give me some time on this one. It is a VERY INTERESTING idea!