The Contrarian

“In the investment markets, what everyone knows is usually not worth knowing.”

The Tariff Excuse

Every move downward in the markets since the start of the year has been attributed to tariffs. Regardless of the actual underlying problems, the base line now is that if the markets go down it is because of something Donald Trump said abour tariffs. Even if there is no news relating to trade within the past week, trade is always making headlines.

This blame game has extended to individual companies as well as we now hear an increasing number of firms blaming the tariffs for their dismal performance. Harley-Davidson says that the Trump tariffs will force it to do manufacturing in other countries. That’s a cop-out. The firm started work on a manufacturing plant last year in Thailand.

Harley has had survival problems for many years before Trump’s policies. It needed a bailout in 2009 to survive. Its U.S. retail sales plunged 12% in the first quarter this year, the 13th decline out of the last 14 quarters. Overseas sales also have been stalling.

We are not aficionados of motorcycles, but it seems that Japanese and German models are much more beautiful and technologically advanced than the “Hog.” Take a look at BMW bikes!

We wrote a week ago that Trump will become a scapegoat for companies in decline. These firms are just not making what customers want. Their CEO’s should look into the mirror if he/she wants to see the person responsible for the dismal company performance.

However, we disagree with the White House policy of forcing goods to be made in the U.S. We had that 40 years ago and the consumer was forced to buy junk. GM cars that fell apart in the first year, GE and Whirlpool appliances that lasted only 1-2 years, RCA TVs and stereos that were dependably of the worst quality.

Then the barriers were lifted and foreign competition like Mercedes, BMW, Toshiba, Sony, and Panasonic forced U.S. firms not to design for obsolescence, but to compete. Protectionism will take us back to those days. But that is not what Trump wants. He wants “fair trade.”

President Trump made a very good proposal recently. Unfortunately, and perhaps intentionally, it didn’t get much attention. He proposed that all countries, including the U.S., eliminate tariffs.

That would help billions of people across the globe increase their savings. Many countries impose 50% or higher tariffs on appliances, TV’s, and other electronics. That keeps the people, and the country, poor. But the politicians enrich themselves as they get payoffs from the local manufacturers.

Corruption is the opposite of economic stimulus.

You can read more of our current analysis and forecasts on the global stock markets, bond markets, and global economies in our award-winning WELLINGTON LETTER, now in its 41st year.

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