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What Investors Need To Know About The Implications Of Trump's Tariffs

Tematica Research profile picture
Tematica Research

A couple of days ago, I shared my view that President Trump's tariff overtures are more than likely a negotiating tactic as he looks to tackle yet another of his campaign promises - international trade. The resignation of Gary Cohn on Tuesday, President Trump's top economic adviser and the head of the National Economic Council, have certainly fanned the flames that this might not be a bluff by Trump - either that or Gary Cohn was unwilling to play the game.

I continue to think Trump is following the negotiating strategies he laid out in his 1987 book, Art of the Deal. But as an investor, we have to game out the potential outcomes, so we can assess the potential risk and position ourselves accordingly.

Should Trump enact the seemingly unpopular trade tariffs on steel and aluminum, what then?

For starters, with an increase in the cost of importing from other countries and a lack of price pressure on American suppliers, steel and aluminum will become more expensive to U.S. companies. No big surprise there. The companies impacted will be wide, ranging from manufacturers of aircraft, high-speed rail, cars, trucks, construction equipment, motors, satellite dishes, smartphones, tablets and appliances. And let's not forget cans, which will impact the price of food, soda and beer, as well as a variety of other products.

What this means is the cost production for Boeing (BA), Ford (F), General Motors (GM), Navistar (NAV), Paccar (PCAR), Caterpillar (CAT), Deere (DE), Cummins (CMI), Apple (AAPL), Dell, Whirlpool (WHR), Coca-Cola (KO), PepsiCo (PEP), Molson Coors (TAP), Anheuser-Busch (BUD), and numerous others will rise.

Will those companies look to change to domestic suppliers?

Most likely, but that will take not only time, but require more domestic capacity to come on line. As we've seen in the domestic oil industry, it's not as

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Tematica Research profile picture
We see Investment themes at work and at play every day in the economy — oftentimes across industries and categories — and other aspects of day to day life. It is the opposite of the typical Wall Street approach to research, which oftentimes overly focuses on a single industry at a time and results in missed opportunities. These themes are identified by looking at the intersection of shifting economics, demographics, psychographics, technologies, mixed in with regulatory mandates and other forces. In other words, looking at the real world that companies are operating in! Some businesses will adapt, while others will leap frog ahead riding these thematic tailwinds to profits and significant share price movements, and sadly there will be those left floundering too. For every Apple, there is a Palm and Blackberry. For every Facebook . . . a MySpace or Friendster. For every Netflix, there’s a Blockbuster. The list goes on and on, even in non-technology categories. By examining these thematic tailwinds, our goal is to identify mispriced securities relative to the business opportunities ahead and avoid those that are overly valued and or staring down the barrel of significant headwinds

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Comments (11)

"Put America first"... and so it goes. Corporations just got a huge tax break. Trump at least understands that America needs a strong industrial base. So much for Starbucks winning a war. You are correct about wages going up. The average worker is not keeping up. Consumer debt at all time highs. Student debt at all time highs. Trump is correct for making Americas industrial base strong again.
Riaz Premjee profile picture
Tarriffs is good it is like taxing the American peoples who have given a big tax break by me so l need to get back the money from them to balance my budget. Latest imaginary tweet by President Donald Trump
As the separations with China progress there will be success stories & disasters in the USA.

This happens with or without Trump, economic submission is not an option for either nation.

If you want stick blame on someone you have 7.5 billion people of equal guilt available, .
johndoe1400 profile picture
"The Response from the EU and Its Potential Impact to the Fed and Interest Rates"

The reaction of the EU is "plain stupid".

They are the ones who are creating the trade war !

Trump's tariff increases do not affect them at all. It is a matter between the US and China.

In fact, they should be grateful for somebody to take these bold steps - which will actually help their own manufacturers if they follow suit against China.

Instead they are preparing for a trade war with the US and at the same time stating that they too will take action against China if China diverts goods bound for the US to their own soil.

Hypocrisy at its highest !!!
Windsun33 profile picture
Did you even read what countries will be affected most? Canada and Mexico the most, China the least (at #11).
johndoe1400 profile picture
Absolutely. And where do they get their steel from ?
Windsun33 profile picture
Your comment makes no sense to me.
Donald J. Trump become the greatest ever president in the United States excluding Washington. He prevented the nation from splitting apart. He is an unfaltering commander in chief during the civil war. His foreign policy is successful. He is a strong supporter of emancipation. He is a strong character of leadership , character and honesty. He gives a series of great speeches before, during and after his presidency.His quotes are among the most famous quotes in the world ... so god bless Abraham Trump
Windsun33 profile picture
I think you are giving Trump far too much credit. (and BTW, Art of the Deal was ghost written).

He has no plan, he has no policy. It's more of toss a grenade in the room and see who survives.
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