When a President says something, it can have an effect on many industries because all industries are regulated to some degree or another. There is a balancing act between less regulation businesses generally like and protecting the buyer which consumers tend to like. Hopefully, there is a balancing act somewhere in between. If the government has too little regulation, there are enough people to see the hole and exploit the weakness in the regulations. If there is too much regulation, it is hard to do business or it tends to protect those already in the field. One of the things the President-elect likes to talk about is tariffs.

In an article by Jack Ewing of the New York Times News Service, President-elect Trump has said he wants to impose a 100% tariff on cars made in Mexico. What does that mean?

According to the Mexican Automobile Industry Association, Mexican factories produced more than 3 million vehicles of which 2 million were exported to the US. The others went to Europe, China and other countries. All the major auto companies have plants in Mexico including BMW, VW, Audi, Mercedes, Ford, Nissans and GM. When the big companies have their plants, they have their supplier plants (of all parts and tires) nearby for additional factories in Mexico. In addition, the large Chinese EV companies are building plants in Mexico.

The reason is partly NAFTA which became the US-Mexico-Canada trade agreement or USMCA.

Ilka Horstmeier, a member of BMW’s management board which produce vehicles in the city of San Luis Potosi said the decision to build a plant is a 40-year decision and much of the output goes to Brazil, other Latin American countries and China. The plant would continue no matter what the US government decides.

However, it is more typical of the American manufacturing companies that ship most of their output back to the US that would be in trouble with changing of tariffs. Would consumers pay more for their vehicle because it takes time to adjust to tariffs.

Linking to dividend paying stocks, what the President says and does affects profitable companies. It is the reason why they have a team of lobbyists to ensure the administration effects are narrow in scope. It is the reason why markets change and can change quickly but regulations are further behind the markets changing nature.

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