President Trump is under the illusion that it is easy to win a trade war and it is projected that in the steel and aluminum industry 30,000 jobs will be created, while in the steel and aluminum manufacturing industry where most of the jobs come from 600,000 jobs will  be lost. One of the reasons is there was a practical reason why companies were buying non American made steel and aluminum – many of the companies making the steel or aluminum has American ownership or healthy American investors using the natural resources of another company. US Steel has plants in Canada, Mexico and the US, if a manufacturer bought steel outside the US but from a US producer is the product American or non American? As of mid July the President continues to issues more tariffs.

In the auto industry, German owned plants in the US exported vehicles to China, now German companies will be shifting production to China with joint ventures. BMW is doing a joint venture with Great Wall Motor Co to produce electric vehicles. BMW also announced it will be making more vehicles with partner Brilliance China Automotive Holdings. BMW sold 560,000 units in China which is more than the US and German markets combined.

Tesla announced in will begin construction of a new plant in China which will produce 500,000 electric vehicles a year within the next 2 or 3 years. Currently China exports the vehicles from its Freemont, California plant. Tariffs have added $30,000 to the price of the vehicles in China. Last year Tesla sold about 15,000 units or 3% of the market for electric vehicles. In terms of ranking that is 10th in the market but 17% of Tesla’s revenue.

Linking to dividend paying stocks, Presidents come and go, but corporate America makes decisions in the best interests of the company. If the interest of the company and the interests of the government are the same, so much the better. Manufacturers similar to every organization like to have options, there are more preferred options but options never the less. Political types can make silly policies, but  as long as companies are not buying into it and maximizing their returns, they are worth holding. If companies buy into the political musing of the day, find alternatives for eventually there will be change.

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