The President will be known as the tariff President because he seemingly loves to impose tariffs on everyone and anything being imported into the US. Interesting in years gone past, tariffs were used to stimulate production inside the country, so far the main impact of increasing tariffs is higher prices which have been passed along to consumers. At some point, tariffs will affect the profitability of American companies who do the importing.
In an article by Stephen Nellis and Sonam Rai of Reuters who talked to analysts about the President imposition of 10% tariffs on $200 billion of Chinese imports. One has to remember companies similar to Apple were importing 98% of the product to the US – the design and what the Apple products do are done in the US, the manufacturing is done in China and Taiwan. For Apple if the President expands the recent tariff increase, it will affect them directly.
The latest tariffs tend to affect cloud computing – companies such as Amazon who cloud business is doing very well including having multiple US departments and agencies using the services. The companies involved woth cloud computing issued a warning the proposed duties will impede the development and adoption of cloud based services and infrastructure.
Linking to dividend paying stocks, the President for reasons unclear to most is playing with the supply system which was built for to benefit US companies and people wonder why? If employment costs are about a $1 or less than $5 an hour in outside country, for the employer to bring jobs back to America, tariffs have to be greater than 10% or even 25%. Seemingly all the President is doing is the opposite of Wal-Mart – raising prices everyday. Similar to many large companies, the consultants and lobbyists rush in to say tariffs might be important to the country, but for our company we need an exception and many exceptions have been asked for and given by the Commerce department. Sometimes the headlines are not exactly what is happening.
There are more questions than answers, till the next time – to raising questions.