The newly revised list of winners and losers is coming up, but first consider a couple of really big losers.
Ford CEO Estimates Cost to Ford at $1 Billion
The Detroit News reports US Steel Most Expensive Thanks to Trump Tariffs.
A Ford Motor Co. executive vice president says steel now costs more in the United States than any other place in the world thanks to President Donald Trump’s tariffs on imported steel.
U.S. steel prices are “certainly up year over year, and they’re up versus what we were expecting,” Joe Hinrichs, Ford president of global operations, said Monday. “U.S. steel is costing more than anywhere else in the world.”
Ford CEO Jim Hackett said previously that the steel and aluminum tariffs were projected to cost Ford $1 billion even though the automaker sources most of its steel and aluminum from U.S. companies.
No Quick Fix for Harley
Bloomberg reports Harley Warns No ‘Quick Fix’ Will Rebuild Shrinking Customer Base
Harley-Davidson Inc. posted one of its worst U.S. sales showings in years and warned of a long road ahead to getting Americans to buy and ride its motorcycles again.
U.S. retail deliveries plunged 13 percent in the three months that ended in September, the steepest quarterly drop in more than eight years. Demand at home has now declined in 15 of the last 16 quarters and is overwhelming tepid growth overseas.
Apparently that is fantastic news.
Many @harleydavidson owners plan to boycott the company if manufacturing moves overseas. Great! Most other companies are coming in our direction, including Harley competitors. A really bad move! U.S. will soon have a level playing field, or better.
— Donald J. Trump (@realDonaldTrump) August 12, 2018
Quite Patriotic
https://twitter.com/PalmerReport/status/1028799189470171136
To be fair, boomers are dying off and millennials have no love affection for big bikes. But, it is absurd for the president to encourage a boycott of US-made goods.
Foreign companies coming here at the expense of US companies going overseas is not a good trade.
Tariff Scorecard
Please consider Here’s How $260 Billion of Tariffs Are Biting Third-Quarter Profit
The first round of tariffs on Chinese imports imposed by President Donald Trump — and China’s $60 billion retaliatory duties on U.S. imports — went into effect in the third quarter. And now those costs are showing up in companies’ results. Some, like United Technologies Corp., are calling out how they are hurting profits, while others, such as Polaris Industries Inc., are putting pressure on suppliers to share in the pain.
This is on top of Trump’s tariffs on steel and aluminum earlier in the year. And there are more coming, with the White House planning to more than double the duty rates for $200 billion worth of Chinese goods on Jan. 1.
In any war, it pays to look not only at intended targets but also any collateral damage. So far, a review of corporate earnings results and conference-call transcripts suggests the number of large global companies harmed by higher tariffs is exponentially larger than those that are helped by them. And the effects extend well beyond the U.S.: In September, BMW AG confirmed profit will fall in 2018, in part because of the trade war, while Volvo Cars delayed its IPO and is in a quandary over its new factory in South Carolina that was supposed to export some cars to China.
Bloomberg says the scorecard is 57-7, but I count 60-4.
Losers
- United Technologies: Expects 5-cent/share headwind this year, offset by price increases, and 15 cents next year. Much of the impact is in imported climate-control and safety equipment like carbon monoxide detectors.
- Harley-Davidson: Harley executives said they should be ready by early next year to share plans to mitigate the impact of tariffs that will cost the company as much as $48 million in 2018.
- 3M Co.: The maker of industrial, safety, health-care and consumer products sees $100 million in “headwinds’’ from tariffs but has been able to compensate by raising prices. The negative full-year drag of raw-material costs is seen now at 15 cents a share, more than prior range of as much as 10 cents.
- Caterpillar: Shares tumbled after the construction equipment maker warned of rising costs. Tariff impact was about $40 million in third quarter; full-year effect is seen at the low-end of the range of $100 million to $200 million.
- Polaris: Maker of motorcycles and snow machines said suppliers must help offset tariff costs if they want to keep doing business with Polaris. Left its guidance for 2018 tariff costs unchanged at $40 million.
- Tile Shop: The rtile and flooring retailer gets half of its products from Asia and may cut that to 25 percent. Tariffs are a threat to its gross margin target of about 70 percent, especially if the current 10 percent tariff rises to 25 percent in January.
- Walmart: The giant retailer said tariffs are a threat to its efforts to be a low-price leader, and while it’s working to monitor margins, it’s possible some prices might rise. One-third of its goods come from outside the U.S.
- Panasonic: The Japanese maker of products including solar panels and electric-vehicle batteries may consider moving some production out of China. The U.S.-China trade dispute will have “significant” impact on Panasonic, said Yoshio Ito, the head of its automotive business.
- Ford: Ford CEO Jim Hackett said tariffs on metals “took about $1 billion in profit from us.”
- BMW: Trade conflicts are “feeding uncertainty,” hurting prices in several markets; sales, profit, margin forecasts cut.
- BP: BP sees impact of about $100 million in the U.S. due to increased costs for steel, CEO Bob Dudley said.
- Samsonite: Wholesale buyers notified in a letter than a 10 percent price increase is imminent if the U.S. follows through with tariffs on Chinese goods on Sept. 24
- Volvo Cars: The Swedish car company, owned by Zhejiang Geely Holding Group Co., delayed a planned IPO amid trade tensions. China’s retaliatory tariffs against the U.S. are disrupting plans to export cars to China from a new factory South Carolina.
- Walmart: In a letter to the U.S. Trade Representative, Walmart warns that the duties to be imposed Sept. 24 in the U.S. and China will raise prices for consumers and hurt profit margins for retailers and suppliers
- Giant Manufacturing: A 10 percent tariff would cost the industry an additional $100 million, and that figure would rise to $250 million if the duty rises to 25 percent, the company told the U.S. Trade Representative in a letter.
- Wilmar International: Company says trade tensions between the U.S. and China improved short-term crush margins, contributing to a jump in second-quarter profit. Still, it warned that a prolonged dispute would negatively impact margins due to lower plant utilization.
- Yamaha Motor: Sees several hundred million yen in negative impact starting next quarter from U.S. tariffs on Chinese-made engines; sees 1 billion yen impact on U.S.-made boats exported to Canada and Europe starting next summer.
- Newell Brands: Maker of Rubbermaid containers, Crock-Pot and Sunbeam appliances, and Graco infant gear estimates $100 million annualized impact
- Toyota: Said U.S. steel and aluminum tariffs cut full-year profit outlook by 10 billion yen ($90 million) and that any more levies would hurt its profit and sales outlook; on July 20 its North American chief said carmaker may have to stop importing some vehicles because of proposed U.S. tariffs
- Bunge: Posted a surprise loss after a wrong bullish bet on Chicago soybean futures, made on mistaken prediction the trade dispute would be brief and China would return as a buyer
- ArcelorMittal: The world’s largest steelmaker trader reported the highest profit in seven years after tariffs on imports boosted prices for production for the company’s U.S. plants
- Steve Madden: CEO predicts handbag prices will rise for U.S. consumers and weighs shifting production to Cambodia from China.
- Stelco Holdings: Canadian steelmaker pegs cost of tariffs at C$11 million ($8.45 million) in the second quarter
- Cummins: Lowered EBITDA forecast in part on expectation of $100 million in tariff-related higher costs in the second half
- SunPower: Paid $17 million for tariffs in first half and expects $51 million in second half — more than it spends on R&D; says it may exit some businesses and cut jobs
- Daimler: Cut profit forecast on U.S.-China trade fight
- Caterpillar: Will boost prices to offset an expected $100 million to $200 million jump in tariff-related material costs in the second half.
- BMW: BMW raised suggested retail prices of its X5 and X6 SUVs in China by 4% to 7%. The carmaker previously warned it wouldn’t be able to absorb China’s tariff increase completely.
- Tyson Foods: Cut fiscal 2018 profit forecast to as low as $5.70 a share from range of $6.55-$6.70, citing tariffs’ negative effect on domestic and export prices, mainly for chicken and pork
- Eastman Chemical: Put a hold on a five-year effort to sell ethylene plants in Texas as prices fall and China erects barriers
- Schneider Electric: Tariffs on imports to the U.S. could affect earnings by as much as $23 million this year.
- Hyundai Motor: Company is trying to minimize risks related to the potential U.S. tariff on imported cars and parts, and may increase local production of SUVs. Hyundai previously warned that the tax would be devastating and push up production costs at its Alabama plant by 10% a year.
- Fiat Chrysler: Fiat cut profit and revenue targets partly because Maserati buyers delayed purchases due to China’s import duty
- General Motors: Cut forecast for year on surging prices for steel and aluminum as tariffs stoke demand. Could be forced to cut U.S. jobs if tariffs are applied to imported vehicles and auto parts.
- Ford: Carmaker says it may incur as much as $300 million in extra costs this year due to escalating Chinese tariffs; Ford says it took a $300 million hit in the quarter because of pricier commodities such as steel and aluminum, whose costs have also been inflated by tariffs.
- Coca-Cola: Raised prices for soda and other beverages to offset higher costs for freight shipments and metals used in its bottling systems.
- Whirlpool: Cites rising cost of raw materials contributing $50 million to $100 million to previous forecast for input-cost increases this year
- Hexcel: Aerospace materials supplier expects a tariff impact of $2 million to $3 million on an annual basis related to imports from China.
- Harley-Davidson: Cuts profit margin forecast for year. Earlier had announced plans to move production overseas, amid EU tariff costs of $100 million annually
- Plains All American Pipeline: Company says tariffs will lead to an additional $40 million in the construction of a pipeline in the largest North American oil field.
- Philips: CEO says company will raise prices on products such as hair clippers imported from China if the U.S. imposes tariffs
- Illinois Tool Works: Tariffs seen representing about 10 percent to 15 percent of the higher cost of materials in 2018 for the maker of equipment for restaurants, medical labs and oil rigs
- Lincoln Electric: Maker of welding equipment and supplies is raising prices on so-called consumables via surcharges instead of permanent hikes because it’s not clear how long tariffs will be in place
- Lennox International: Maker of air conditioners forecasts $5 million in costs in 2018 from tariffs and is raising prices to offset the expenses
- Stanley Black & Decker: Estimates $35 million impact in 2018 from tariffs already implemented; projects up to $80 million a year in costs from Trump’s proposal for $200 billion additional China tariffs including vacuums, hand tools, power tool accessories. Plans price increases to offset.
- General Electric: Sees as much as $400 million a year in impact from current and proposed tariffs, though about half could be offset by credits for exports to China. May adjust supply chain to mitigate effects.
- Gentex: Maker of rearview mirrors for cars cut its annual gross margin forecast, citing increased raw material costs of as much as $8 million in the second half linked to imports from China.
- Saudi Aramco: Raised prices for butane and propane as Chinese companies are buying more LPG from the Saudi state-run producer and cutting imports from the U.S.
- PPG Industries: Maker of coatings for manufacturing, automotive industries says tariffs adding “modest cost” to raw materials, especially for tinplate used for paint cans.
- Sonoco: Maker of packaging materials, including pull tabs for canned food, projects as much as $9 million in tariff costs in second half of the year, plans price hike on some products.
- Alfa: Owner of processed-foods maker Sigma switched to Canadian, European and South American suppliers from the U.S. to avoid tariff.
- Electrolux: Expects $10 million in added second-half costs from parts imported to U.S. and higher steel and aluminum prices.
- Alcoa: Cut profit forecast ranges by $500 million, citing tariffs on aluminum it imports from Canada along with higher energy costs and lower market prices
- Procter & Gamble: Cites ‘meaningful’ impact of tariffs on a handful of products in Canada, which accounts for 3% of global sales
- Kloeckner: Steel trader raises earnings forecast on higher U.S. prices.
- Suntory Holdings: The owner of Jim Beam bourbon whiskey, produced in Kentucky, says it must consider raising prices next year if EU tariffs on U.S. products continue.
- Osram: Trade tensions will weaken sales of automotive lighting parts
- Volvo Cars: Owner Li Shufu says cars will cost more as trade wars escalate
- Brown-Forman: Raised Jack Daniel’s prices in light of EU tariffs
- MillerCoors: Brewer says profit could fall by $40 million depending on how much aluminum prices rise
Winners
- Covanta: U.S. tariffs on imported steel helped raise its revenue forecast for metal it recycles from waste by $10 a ton, to $145-$175.
- Nucor: Credits tariff for higher prices and demand, sees more than doubling investments to $1 billion in 2018.
- CSX: Rail operator sees positive effect on both steel and ore shipments as U.S. steelmakers add production
- Ryerson: Metal processor’s sales guidance exceeds estimates in part because of higher anticipated demand from inventory dislocations tied to tariffs.
More Losers Lost in the Count
I have noted many companies negatively impacted by Trump’s tariffs that did not make the Bloomberg list.
- Three US Tire-Chord Makers Threaten to Close Doors Due to Trump Tariffs
- Chippewa Bean Company
- Latest US Trade Casualties: Nails, Whiskey, Cranberries, Lobster, and Autos Too
Mid Continent Nail
Tariff Levels Not Seen in 15 Years
More tariffs kick in January 1. China will retaliate.
MarketWatch comments Trump’s Trade Fights and a Hard Brexit Could Take Tariffs to Levels Not Seen in 15 Years.
“Combined, these two would add 142 [basis points] to the average global import tariff, essentially reversing about 15 years of progress in global tariff reduction,” said UBS chief economist, Arend Kapteyn, and his colleagues in a recent note.
US at Mercy of Mexico’s Courts
Reuters reports New trade Pact Leaves Most U.S. Industry at Mercy of Mexico’s Courts
The new North American trade agreement ends key legal protections for many U.S. businesses operating in Mexico, leaving their operations exposed to a risk they had avoided under the old trade deal: Mexico’s court system.
For thousands of U.S. firms, the change could add complications and uncertainty to doing business south of the border. Mexico is the third-largest U.S. trading partner.
The previous trade agreement, NAFTA, included provisions that gave U.S. firms operating in Mexico and Canada the option to challenge government decisions at an international tribunal.
The removal of the investment protection means firms would now be at the mercy of Mexico’s courts, which are notorious for corruption, an energy industry source said. Large U.S. firms have typically won these kinds of disputes, sources said.
In 2009, agribusiness Cargill Inc won $77 million from the arbitration tribunal over trade barriers the company said Mexico erected against high-fructose corn syrup from 2002 to 2007.
In 2015, Ottawa was forced to pay ExxonMobil Corp and Murphy Oil Corp $17 million in damages after the companies won a victory against a requirement to spend money on research and development.
Trump pressed hard for this provision that leaves US companies in worse shape than NAFTA.
Why?
Trump thinks that if US companies are at the mercy or Mexican courts, they won’t do business there at all.
Real Cost of Trump’s Tariffs
CNN has an excellent video on the Real Cost of Trump’s Tariffs
Click on the link and play the video. There are some great clips of Mid Continent Steel and soybeans as well as references to Smoot Hawley.
“Trade not aid. I’d rather have the tariffs removed,” said one farmer.
Fool’s Mission
Unfortunately, Trump is on a fool’s mission: Repercussions Mount but Trade War Really Just Starting.
Mike “Mish” Shedlock
dead, bankrupt companies didnt report.
Bastiat!
Now that the window breakers have stopped, the glaziers are complaining that they are losing business!
The seen and unseen applies here too.
But we cant seem to have a RATIONAL discussion on tariffs either way.
The US steel industry has enough capacity to make enough steel to supply manufacturing for the entire nation. US domestic steel prices are up sure and the lead times are now 3 times as longer. I suggest they put in orders now and some of those idled mills will restart.
The problem with Trump’s tariffs:
There should have been equal tariff increases on products made from steel and aluminum than there were tariffs for steel and aluminum to avoid imported steel and aluminum products eating marketshare from US manufactured steel and aluminum products that became more expensive when steel and aluminum prices rose due to tariffs.
So the problem was too few tariffs instead of too much tariffs.
When it comes to US producers that use foreign manufactured parts from say China as part of their manufacturing process it is obvious they will lose from tariffs against Chinese made products since their profits margins will be cut.
However part of the reason for tariffs is to bring more production to USA therefore bringing more well paid jobs to USA and therefore increasing the tax base when more people are working as a whole and many of these are working in well paid jobs.
Actually when one thinks about it companies complaining how tariffs cause costs to them and drop their profit margin is PROOF of the fact I have been repeating that tariffs are NOT paid by the consumers because tariffs are paid by companies producing products because of fact I am hereby naming “optimal maximum pricing theory” where companies price their products at the maximum price that brings most sales while maximizing the company’s total profits so producers producing products that have an unique moat are paying the tariffs since their products are priced at a level where the company can get most profits while having maximum profit margin that brings most sales to have an overall maximum profit for the company.
So Apple eats the tariffs by having a lower profit margin.
For products that are not unique and that have no moat or only a minimal moat and that therefore have low profit margins for the producer the payer of tariffs is the company selling the products so sellers of lots of Chinese made products like Amazon and Walmart are mostly paying the tariffs in those cases.
Overall tariffs are GOOD for USA and American workers especially in the current debt enabled globalism where only beneficiaries have been international companies, Chinese economy and banks putting consumers more and more into debt to enable companies eat their cake (lower cost of production and more profit) while letting them also keep their cake (consumption levels maintained by ever increasing levels of debt at all levels from consumers, companies, cities, states and federal government.
The only way to save USA economy in the long term is to stop the increase in debt levels and bring more well paid jobs and therefore more tax revenues to USA.
The losers in this fight against this debt-enabled-consumer-consumption-capitalism-with-offshored-production-with-high-profit-margins-and-imported-low-wage-immigrants-(both illegal and legal)-to-lower-wages will be multinational companies and large companies selling mostly overseas produced products and users of low wage workers in USA and large banks and creditcard companies.
To continue the current way in debt-enabled-consumer-consumption-capitalism will lead to debt levels rising to such levels that there will be a massive economic crash in a situation where the assets of USA namely educated workforce and well paid workers will have been decimated and USA will be like Weimar or Venezuela.
Trump is doing something historic, I doubt he realizes fully what he is doing and it is more about his instincts and opinions he has had since 1980’s regarding trade.
Fed and USA bank regulations have enabled this debt-consumerism and they need to be tightened also and Fed goosing economy for the short term while always increasing the debt burden needs to be stopped.
I have not yet reviewed the TSLA announcement – but I will
Madden is going to move manufacture of handbags from China to Cambodia — so we are supposed to hate Trump? Get a grip, please! US consumers are first and foremost US producers — and unless US consumers/producers have good productive jobs, they are not going to be buying handbags from anyone.
We have had decades of government policies which have encouraged businesses to offshore production. No surprise that those same businesses have organized themselves accordingly, and get upset when the rules change.
But the stubborn reality is that the status quo is unsustainable. Ultimately, the trade imbalance is going to end. The only thing we can have any influence on is how it ends.
Somebody is winning….
“Exports rose 1.8%, or $2.5 billion, while imports rose 1.5%, or $3.1 billion. Economists had forecast a deficit of $76.2 billion.”
Government intervention, of any kind, is extremely seldom beneficial to anyone aside from the tiniest of cliques closest to the government itself. Everyone else just ends up paying paying for the charades.
It makes no difference if it is “monetary policy”, minimum wages, mandated insurance, licensing requirements, war nor tariffs. All any of them are, are more government excuses for taking money from productive people, and redistributing it to themselves and to those whose efforts are directed at lobbying government, rather than doing something productive themselves.
It’s no different than trying to find anyone, aside from the thieves themselves, who benefit from an increase in burglary in a country. There may be occasional beneficiaries; say prybar and burglary alarm installers in the case of burglary, casket makers and undertakers in case of war, and inefficient steel producers in case of tariffs; but for pretty much everyone else, a burglary wave just plain sucks.
Minimum wages at modest levels are a GOOD thing.
Obviously minimum wages over 10 dollars an hour are crazy because they lead to not as effective workers not having work at all.
Minimum wages of max 10 dollars are a GOOD thing and situation where not so effective workers are paid 10 dollars an hour and effective workers are paid 15-30 dollars because employers COMPETE for the good workers would be an ideal situation for the economy as a whole.
Mandated insurance in things where you can influence somebody else like mandated car crash insurance is a GOOD thing.
Licensing requirements in things where you can effect people’s health are a GOOD thing provided that there are NO CAPS on the number of licenses and that there are enough student places in the field to not make an artificial scarcity of say doctors or nurses.
FREE capitalism with sensible regulations is a good thing.
The problem has been over-regulation and regulation-creep NOT the principle of regulation itself.
Arbitrary upon arbitrary upon arbitry upon arbitrary….
Why $10? Because you feel like it? Things just turn from magically “good” to equally magically “bad” between $10 and $10.01? Why the heck should some taxfeeder harass a kid about taking an hour and a minute to mow a lawn he gets $10 for? It’s just plain silly all around. If people offer too low a wage, noone accepts their offer. It’s no different at $10/hr than at $1000/hour nor $5/hour.
If your wrongdoing harms someone else, it’s a criminal matter. With proper protections in place before you can convict anyone. Civil suits are for sorting out interpretation disagreements about parties to voluntarily entered into agreements. That’s why civil suits don’t have beyond any reasonable doubt hurdles, but criminal matters do. If whatever you supposedly did “wrong” does not pass the bar for criminal indictment and conviction, no government has any business harassing you over it. CRIMINAL courts are what is there to “influence” you to not “harm others.” Not civil courts. The only thing accomplished by pretending the latter does, is massive welfare for ambulance chasers, who can now shale people down for nothing, rather than having to go through the full burden of first getting a proper criminal conviction. Those ambulance chasers then inevitably lobby to make sure everyone is forced at gunpoint to “have insurance” against anything at all. Simply so the leeches have guaranteed deeper pockets to rob. Again, you haven’t been shown to have done anything wrong, until you have been first indicted, then convicted, of a criminal wrongdoing. By a jury of peers. Full process. Take that away, and you are left where we are now: With exactly no more protections against arbitrary persecution than afforded the average North Korean. All for the benefit of a bunch of ambulance chasers and other scum with no other talent than harassing and robbing others.
Who the heck licenses the licensers? Do you need a license to do that as well? And what the heck is “affecting people’s health?” Loud dog barks are detrimental to health. Ditto diesel cars. And gasoline cars. And planes. And lack of sunlight. Should only licensed doctors have dogs? Be alowed to drive cars? Be allowed to live outside California? All you end up encouraging, crawling down that hole, is more arbitrariness.
There is no “free” anything with “regulation.” Regulation explicitly destroys freedom. Moses did not come down from Zion with some one true delineation between “sensible” regulation and “over regulation.” Again, once you crawl down that rathole, all you do is grant whomever is in power, unlimited license to make that distinction. Which he will then proceed to do by issuing regulations according to what those who pays him the most asks for. That’s it. Always. It will never be any different.
Free people are adaptable and resilient. Left alone, they will simply route around, and leave to starve, those they don’t trust not to misbehave. They don’t need self serving idiots nor their brainwashed sycophants to “protect” them. Only those who want to get away with misbehaving, without being routed around, wants a lobbyable third party to insert itself and make decisions about who others are allowed the freedom to route around.