For the past 70 years, Corporate America has been benefiting from a supply system which enables the companies to reduce costs, maintain and increase margins to benefit the shareholders of the company. The system while nominally keeps the corporate head office in the US, allows for the companies to source, manufacturer, distribute goods made around the world to consumers. A classic example is Apple – the engineering and head office is in the US, the iPhone is made in China and the margins remain high for Apple to make a great deal of profits. The US President similar to all leaders around the world has a right to impose tariffs on goods and services to try to stimulate more manufacturing in the US. Although with Artificial Intelligence and Robots, the head count at a typical factory will be much lower than the past. President Trump imposed tariffs and Corporate America does what it always has and will, look at their self-interest before the country of origin.

In the case of Harley Davidson, the marketing appeal of the motorcycle – typically aimed at men, allows the President to be caught up in the appeal of the company. If the President had examined the company by looking at the website, it would have noticed Harley while based in Milwaukee, Wisconsin has production facilities outside the US. The strategy of the company is to add 2 million US riders per year, grow the international business to make it 50% of the company and deliver superior returns. The company has manufacturing plants in the US, Brazil, India and Thailand. This is good for the company for it has options when politicians in any country decide to impose tariffs. Invariably one of the other countries where it has operations allows entry into the country. If President Trump wishes to impose tariffs. other countries will impose tariffs on the US, Harley can lower its head count in the US and increase it elsewhere.

Linking to dividend paying stocks, the global supply chain works very well until someone tries to relive a time gone by, but politicians are elected to do something. For 70 plus years, the supply chain has been evolving to what it is now and if you watch Shark Tank or shows similar to this – it is amazing where the cost of manufacturing and transporting goods is cheaper than doing it in the same country.  Tariffs might change the supply system and it is good to see how companies will adapt or are flexible to changes. Although politicians seem to give with one hand and take some back with another.

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