In April, President Trump announced to the world Liberation Day in connection to the trade and how goods move around the world. While the manner in which he did them is in the courts and the Supreme Court will decide whether the President can both enact and change tariffs by himself or does the Congress have to vote for it first. The tariffs are having an effect on the economy.

The idea behind President Trump is if tariffs are imposed on goods made outside the US, goods made inside the US will be more competitive and maybe companies will decide to make more goods in the US. It is a good idea, tariffs have been used for generations but similar to anything involving a good being made there are timelines that come into place. No company can start making everything in the US, so goods still have to be imported.

In an article by Ana Swanson of the New York Times News Service, in August imports dropped 5.1% tp $340.4 billion according to data from the Commerce Department.

Prior to the tariffs, companies stockpiled goods at non tariffs prices and it was expected the first few months after implementation importation of goods would fall.

US goods exports also fell shrinking $500 million to $179 billion as the rest of the world bought fewer American consumer goods, cars and car parts.

The trade deficit fell 24% to $59.6 billion compared with July.

According to the Yale Budget Lab, the US effective tariff rate is more than 18%, the highest level since 1934.

Tariffs are likely to continue to weigh on imports in the coming months. Because of the rush by businesses to stock up before the tariffs, US companies held off on increasing their prices as they worked through the old inventory. Eventually the inventory will need to be replaced, and companies will pass onto the consumer higher prices.

Linking to dividend paying stocks, if you own profit making companies, these are the companies that will need to pass on higher prices assuming they cannot replace the goods to American made. Chances are high they will not replace everything because it does not exist and offshore makes it cheaper and equal quality. Some higher value manufacturing can be done in the US, but CEOs will explain it at Investor Days and quarterly meetings. The issue for the investor is done the company have the ability to pass on higher costs in the form of higher prices. If it does, it can be a good company to own.

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