For every company, how the supply chain or logistics or execution of strategies will tell you how well that company is doing. For the auto industry, There has been a system which lowers costs, gives flexibility to companies and enhances margins allowing the auto companies to make money. The system has been built up over the years using NAFTA or North American Free Trade Alliance. US based and the foreign based auto companies including GM. Ford, Fiat Chrysler, Toyota, VW, BMW, Nissan, Hyundai and Honda have all benefited. There are car plants in Canada, US and Mexico; the big auto companies many years ago shifted the parts to Parts Companies who locate near the plants and all is good. The finished product is sold around the world.

According to David Shepardson writing for Reuters a coalition of the big auto companies and part supplier companies have told President Trump if tariffs of up to 25% on cars then hundreds of thousands of American jobs would be lost. The reason is for all the big named auto companies the parts and supplies to make the vehicle come from all three countries. The system open up the process for many states and provinces to offer incentives for the auto companies to locate in their state or province. The plants are now there because of some formula, they are located in the state because the state added many financial incentives for the plant to locate. The state was hoping for the multiplier effect of income spent in their communities and the parts plants, the truckers locating nearby.

The President has the right to impose tariffs, it is for companies to response to the tariffs and other countries to fight to maintain the existing situation. The Alliance believes a 25% tariff would add $5,800 increase to the price of a car and given car and truck sales over the 3 countries cost $45 billion a year to consumers. In terms of jobs, it is possible up to 200,000 jobs would be lost in the US and 400,000 plus jobs lost in non US countries.

In addition, both Mercedes and BMW which have plants in the US would cut back because some of the production is sent outside the US and would be exposed to tariffs in other countries. Yet the President believes trade wars are easily won.

Linking to dividend paying stocks, while auto stocks and manufacturing are important to the economy the real driver of the economy is services and technology. On the internet we think of free flowing services. The next round the countries will tackle will be services and technology, where most companies derive half of their revenues from outside the US borders. There is a reason why trade wars are not easily won, hopefully the President will learn that and there will be calm in the marketplace.

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