Tariffs, Auto Manufacturers, and Currying Favor with Trump
Media Hit, 12/26/2024
I’ve got two media hits this morning - the first one at 8:25 and the second being my usual one at 9:25. It’s currently 7:35 and I have no links just yet, so… this will be a fun adventure. Still, I know that the weekly initial jobless claims data is coming out at 8:30 this morning. Too late for the first segment to cover the numbers as released, but I’m pretty sure that that will be at least a part of the discussion at 9:25.
At 8:30, I got the links for the 9:25 segment, giving me about 45 minutes to prepare talking points, etc.
Links
Generally speaking, I’m really excited about these topics and I hope that I’ll get the question about tariffs. I love talking tariffs on NewsMax, mostly because they usually have someone on there who, like Trump and Oren Cass, think they’re just amazing and will usher in a new era of peace, prosperity, and progress when history flies in the face of such notions.
Car Affordability and Tariffs
Look, tariffs are taxes, plain and simple. You can’t seriously expect producers to absorb a cost and not respond to it in any way, at least not in the medium- to long-term.
Analysts project that these tariffs on Canada and Mexico will increase the price of cars by about $3,000.
But what isn’t reported on is that this will also push up the cost of used cars, as more people try to buy those in lieu of paying the newly higher prices for new cars.
Now I don’t need to tell you all that cars are already expensive and that used cars are also very expensive. This is only going to make it worse.
Using tariffs harms the American consumers. And it’s not even clear that the threat of tariffs will achieve Trump’s stated goals of getting Canada and Mexico to patrol their borders for drugs and illegal immigration any better than they already are. We’ve tried this in the past. It didn’t work then and I’m highly skeptical that it will work now.
Will they help the American consumer? Again, on net, no. It might help a few hundred or a few thousand workers in particular industries, but the rest of the industries will face serious losses, just as we saw with the steel and aluminum tariffs from Trump/Biden and the tire tariffs from Obama.
Will they raise revenues for the government? Again, hardly. First, tariffs generally do not raise much revenue to begin with, even if they are placed at high rates. Second, they tend to start trade wars and we tend to offset the domestic losers of other countries’ tariffs through subsidies. See, for example, the farmers that Trump and Biden both bailed out. So any additional revenue raised from increased tariffs ends up going right out the door to help out people harmed by retaliatory tariffs. Net effect on revenue is close to zero if not negative.
Harming people is bad. Harming people for no benefit is worse. Harming people and costing them, too, is worst. This is worst.
Companies Donating to Trump’s Inauguration
Yea, this is no surprise. The President has basically threatened every single major American producer with his universal tariff proposal. What’s more, he’s signaled that he’ll do it unilaterally if he has to. Finally, he’s shown that even before getting into office, he wields tremendous power over the current Legislature.
Companies like Facebook and Amazon have donated millions to his inauguration but they are far from alone.
In fact, it’s likely that Trump will raise more money for his inauguration than Biden did just four years ago. This is most likely because companies view Trump as someone who values “transactions” and as someone who believes in rewarding his friends and punishing his enemies.
Better to be on the list of potential “friends” of Trump than on his enemies list.
Initial Jobless Claims
Pre-release, talking points
Right now, there are a bunch of congressional staff members in the Capitol who are looking at the initial jobless reports and taking notes to bring back to their member’s offices. They’re secluded somewhere in the Capitol building and they’re holding physical copies of the reports that they cannot take with them and they cannot leave the room until the report is officially released at 8:30.
We’re seeing early reports of US futures and Treasuries slipping ahead of these while stock markets seem to be rallying a bit, all ahead of the official release.
Analysts are currently projecting that jobless claims change modestly, I’m seeing predictions ranging +3,000 to -6,000 as compared to last week.
I’m also using this website for some data
Likely has to do with the spending package that was passed over the weekend averting a government shut down.
Post-release talking points
Jobless claims declined by 1,000, fitting within the range given above by analysts.
This isn’t a big swing, but what’s remarkable is that this figure has gone down despite the strikes going on and the bluster about tariffs, etc. coming down the pipes.
Note: by bringing this up, I can bridge to talking about the Amazon strikes if I want to, which I’m much more comfortable talking about than the details of the unemployment report. It also lets me segue into tariffs if I don’t get that topic and want to respond to claims made by whoever I share the segment with.
All of these tend to increase jobless claims, so that we saw a modest decrease despite all of this belies an underlying economic strength of the US labor market.
What Happened
I got bumped/asked to reschedule for the 8:25 hit. This explains why I had no links sent my way ahead of time! If I’m being honest, this is a bit of a relief, since I generally do not like to comment on pending economic releases, especially so close to their actual transmission.
My 9:25 segment, though, did happen. My co-guest, Hillary Fordwich, touted the familiar line of needing to “incentivize companies to invest in manufacturing jobs in the U.S.” Frankly, there must be some secret cabal of people disseminating focus group tested talking points because this sounds exactly like what everyone is saying on this matter.
The truth, however, is that these tariffs will only make manufacturing in the US more expensive. The reasoning behind this is simple: the bulk of the container ships coming into the US do not contain final goods for purchase by consumers; they contain raw materials and intermediate goods used by producers to actually, you know, manufacture things. So we want to incentivize manufacturing by making it more expensive to manufacture? Give me a break.