Most politicians love simple slogans and with them people can form an opinion of what that means. Often the slogan is something that embraces the candidate for he or she has a track record connected to the slogan. Political slogans such as change or moving forward to the future imply the other party wants to keep things the way they are or is not looking forward to the future. And very often the implications have bearing in truth. The President-elect slogan is Make America Great Again and he seems to want to go back to a time when manufacturing jobs were unionized and there was an abundance of them in the US. The big problem his party has encouraged business not to be unionized and given the high cost of labor, the supply chains have moved operations to lower cost labor areas of the world. Similar to lower prices, there is always a lower price somewhere and somewhere in the world there are always lower labor costs. As long the infrastructure can move the goods along, those countries are competing for low wage manufacturing jobs.

In an article by Keith Bradsher of New York Times News Service, while President-elect Trump wants to impose tariffs on countries similar to China, the country of China is suggesting it will impose restrictions on products going to the US. Beijing’s decision to order a trade embargo on the export of 4 critical minerals to the US. The concern is a provision extending the ban to companies in other countries that transfer minerals to US firms after acquiring them from China. This is called the transshipment on exports.

The ban threatens to divide global supply chains by forcing companies to choose where products with certain materials and components can be supplied only to the US market or only to the Chinese market.

On December 3, the same day the Ministry of Commerce published the ban, 4 government linked trade associations directed companies to avoid buying American computer chips. 2 days later, the Ministry of Finance unveiled a draft plan to overhaul the bidding on government contracts, heavily favoring companies that product in China. (Former White House advisor on economic issues Stephen Moore said recently the US could impose tariffs at the same time as offering incentives to American companies to do more manufacturing in the US, although President-elect Trump has said nothing about the idea, he only wants tariffs)

Governments have a right to impose tariffs if they want to, however when it is your top trading partners, the other countries have a right to do something that will hurt the US in the short term. Similar to most things in life, they are not as simple as a slogan, unless the government wants to subsidize parts of the economy. Right now there are desires to cut the budget, not subsidize.

Linking to dividend paying stocks, some of these companies are the large heavy weight companies that have made and benefited from the existing supply chains. To change it may mean less profits, which means they will lobby to ensure their company is left alone to do its thing. As you examine your investments how does the supply system work?

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