President Trump has a view of the world but he seems to rooted in the past and beginning not to match reality. On February 28, the President was having a discussion with the steel and aluminium makers who among other things supply the auto makers who have over the years have moved the method in which cars are produced. The auto makers use countries around the world for parts and supplies and often put them together in the home country. The President wants more autos and trucks made and produced in the US, although he forgets more and more manufacturing is done by robots not people. Auto plants will never be big employment generators, but autos and trucks are still an important part of the economy. While meeting with car makers he told the world, I will impose a tariff on steel and aluminum.

In the past, countries have tried to impose tariffs to ensure domestic competition has an fair or reasonably equal opportunity to earn contracts. The US imposed tariffs on steel and aluminium 10 years ago, it lasted less than a year. The problem is the big giant steel mills can not compete with new steel mills. The large companies carry a larger fixed costs and the steel they use to make profits on, the margins are very thin because of smaller steel mills. There are wonderful learning sessions about the steel industry and how it changed by Clayton Christensen’s Theory of Disruption. If you want to read about it or watch the videos on You Tube. They are worth watching.

President Tump has picked steel and aluminum to go after the trade imbalance of China however, China is not the number maker and importer of steel and aluminium, the US allies and biggest customers are. Prior to the 1970’s Trump would have been correct, in the 2000’s he is playing a game that alienates his allies. In additon much of the manufacturing is offshore because American companies moved their operations to other countries to cut costs and the tax system helped encourage them to do it.

If someone goes into Walmart much of the items you will see and save money on will be made outside the US. It is similar to many retail stores. The world has changed and the President does not seem to realize it and corporate America has benefited from the supply system changes. Consumers may have benefited from lower prices, but combined with lower wages and wage stagnation, they might remember an easier time. The President who changes his mind on policies daily, makes it hard to do investment decisions because of his instability and his lack of understanding the facts. If only the President would read his reports rather than watching TV.

The President is pushing other countries to do something back for if they do nothing, their home elector will see them as weak. In addition, the President is in the midst of trying to examine trade deals with Mexico and Canada which border the US. Negotiations were made much more difficult.

Linking to dividend paying stocks, as investors we pay a great deal of attention to the President of the organization because he/she speaks for it. The person can pick whatever side they wish, it will have consequences. If the person can be seen as understanding the trade offs, one might be able to invest. If the person is not seen as understanding both sides before they speak, uncertainty is the normal course of events. Many people choose to wait on the sidelines when uncertainity is the norm.

There are more questions than answers, till the next time – to raising questions.