The trade and economy mega-thread (14 Viewers)

[superchuck500]

Is there a trade deal with China? Is it really a deal or just a pull-back to status quo ante? Is Trump advancing US interests in this well-executed trade battle plan or was this poorly conceived from the start . . . and harmful?

I think the jury's still out, but I haven't seen that the Chinese are offering much in compromise - and it's not even clear if there's going to be an agreement. But it's clear they are working on something and I'm sure Trump will sell it as the greatest trade deal ever. The proof will be in the details.

 

[efil4]

 

[efil4]

Two idiots trashing each other. Oh well….

Basically same stance the WH is taking on it.

 

[MT15]

I would say - don’t buy stocks today, wait until tomorrow when the tariffs take effect and we get another 2-3,000 point drop.

 

[superchuck500]

 

[efil4]

AAAAAAAAAAAAND market rally is over.

 

[efil4]

I would say - don’t buy stocks today, wait until tomorrow when the tariffs take effect and we get another 2-3,000 point drop.

i think most investors were, while initially happy to see rally, were apprehensive and waiting for the other shoe to drop ( China 104% tariff ) and it has.

and the market reacted exactly as everyone thought it would.

His comment came while rally was underway. ( in green around 2% )

 

[UncleTrvlingJim]

so, i had moved almost my entire portfolio to cash a couple weeks ago (i had mentioned it here). I'm probably going to push it back in now. If tariffs stick long term, the market will decline further, but if they do get lifted soon, this is probably close to the bottom.. i generally don't go for timing the market, but the big selloff was pretty predictable.. I don't really know where things are going from here, so at least I missed a 12% shave...even if it goes down further, i saved myself some pain.

 

[efil4]

so, i had moved almost my entire portfolio to cash a couple weeks ago (i had mentioned it here). I'm probably going to push it back in now. If tariffs stick long term, the market will decline further, but if they do get lifted soon, this is probably close to the bottom.. i generally don't go for timing the market, but the big selloff was pretty predictable.. I don't really know where things are going from here, so at least I missed a 12% shave...even if it goes down further, i saved myself some pain.

i was advised to wait til tomorrow at earliest. my guy stated that today will be telling - and so far, its telling me we havent reached bottom. And if you are targeting specific stocks, be sure to identify long term risks to inflation, supply, additional tariffs ( still have him focused on smeiconductors ) and their susceptablilty to recession.

Outlooks will be coming soon to, and if those are negative as well, we could see another 10-15% drop.

i know you have a handle on what ur doing, just a bit of caution.

I was itching yesterday at close to make moves so i called him. Said "nope- we wait"

 

[UncleTrvlingJim]

i was advised to wait til tomorrow at earliest. my guy stated that today will be telling - and so far, its telling me we havent reached bottom. And if you are targeting specific stocks, be sure to identify long term risks to inflation, supply, additional tariffs ( still have him focused on smeiconductors ) and their susceptablilty to recession.

Outlooks will be coming soon to, and if those are negative as well, we could see another 10-15% drop.

i know you have a handle on what ur doing, just a bit of caution.

I was itching yesterday at close to make moves so i called him. Said "nope- we wait"

Yeah, I expect that we have further to go down, but I don't know where it is... and I'm ok with just taking the sure thing. Technically what I did was "dumb" b/c timing the market is tough... but it was so frothy and Trump is a guarantee volatility maker, I figured it was ok.

I wouldn't be surprised if we drop another 20% though.

 

[MT15]

It would be pretty hard to convince me that Trump or someone very very close to him isn’t messing with the market on purpose. Betting on futures because he or they know what he’s going to say. He did it somewhat in his first term with individual stocks - either badmouthing them or pumping them up.

This time they’re going for the entire market.

I wish I had had the guts to get out - but we sit tight. We’ve done the same through other downturns. It’s served us well in the past.

 

[Optimus Prime]

I'll admit that a lot of this is beyond me

Can someone explain this to me?

There has been talk of short term pain versus long term gain

It costs X to make a product in a foreign country, it is sent to America and sold to the American consumers for Y

When a tariff is added to the product the American importer pays that tariff and passes the cost of to the consumer so now the product is sold to the public for Y + tariff

Is that right?

If so then that is the pain.

My understanding is the long term gain is that America is supposed to start making the products here instead of buying them from overseas

If the land was already purchased, the permits acquired, the plans completed and the first shovelful of dirt was turned over today how long would it be until a factory would be ready to start churning out product? I'm betting a year at the bare minimum probably several, and it would take a year at least to get the land, plans, permits etc.

And Is it even possible to get all the raw materials and parts and components made here (each of which would need their own factories)?

And these factories would need employees (at expensive American salaries) and/or expensive robotics

Stuff is made in foreign countries for a reason, and most of that reason is that it's much cheaper

My understanding is that the cost to make the same product here would be much more than X and that would make the price the public pays would be much more than Y, is that right?

So if it would take years to even get to the point be able to make these goods stateside, and the products would be much more expensive what is the point and positive to any of this?

 

[efil4]

I'll admit that a lot of this is beyond me

Can someone explain this to me?

There has been talk of short term pain versus long term gain

It costs X to make a product in a foreign country, it is sent to America and sole to the American consumers for Y

When a tariff is added to the product the American importer pays that tariff and passes the cost of to the consumer so now the product is sold to the public for Y + tariff

Is that right?

If so then that is the pain.

My understanding is the gain is that America is supposed to start making the products here instead of buying them from overseas

If the land was already purchased, the permits acquired, the plans completed and the first shovelful of dirt was turned over today how long would it be until a factory would be ready to start churning out product? I'm betting a year at the bare minimum probably several

Is it even possible to get all the raw materials and parts and components made here (which would need their factories)?

And these factories would need expensive employees (at expensive American salaries) or expensive robotics

Stuff is made in foreign countries for a reason, and most of that reason is that it's much cheaper

My understanding is that the cost to make the same product here would be much more than X and that would make the price the public pays would be much more than Y, is that right?

So if it would take years to get to the point be able to make these good stateside, and the product would be more expensive what is the point and positive to any of this?

so you are basically on right track.

The cost of the tariff is paid by consumer. Not the country of origin, not the exporter, not the importer- the end user.
Keeling in mind that the MFG cost in China doesnt change. The cost of materials sourced in China to make X ( so long as material not from US ) doesnt change. The ONLY thing changing is the END PRICE.
The thinking? That Americans will STOP buying X because now it costs $20 instead of $10. Putting pressure on China ( because now orders are down, mfgs slows and layoffs happen etc etc ) to work some sort of deal. Conversely, they purport that we can MOVE those mfg into US.
But as you stated, if they are building NEW, there is a time element along with cost - now if that takes a total of 2 years, is the CONSUMER still going to want to by X at $20( thats what we would need to price to make a profit after all overhead/cost of mfg included )
Further, Americans on a budget are simply not going to pay $20 for an item they can get for $10 just because its mfg in US. They wont. Because now you threaten their individual economics- and they CARE about that way before country economics.

And if demand for X wanes- guess what happens to that mfg facility with 200 line employees? The company is NOT going to continue operation and payroll simply because its "best for USA" lol.

its a joke of a plan that has no real end-game. It flies in the face of the real economics that are at play by every single consumer and producer in the US.

 

[RobF]

so you are basically on right track.

The cost of the tariff is paid by consumer. Not the country of origin, not the exporter, not the importer- the end user.
Keeling in mind that the MFG cost in China doesnt change. The cost of materials sourced in China to make X ( so long as material not from US ) doesnt change. The ONLY thing changing is the END PRICE.
The thinking? That Americans will STOP buying X because now it costs $20 instead of $10. Putting pressure on China ( because now orders are down, mfgs slows and layoffs happen etc etc ) to work some sort of deal. Conversely, they purport that we can MOVE those mfg into US.
But as you stated, if they are building NEW, there is a time element along with cost - now if that takes a total of 2 years, is the CONSUMER still going to want to by X at $20( thats what we would need to price to make a profit after all overhead/cost of mfg included )
Further, Americans on a budget are simply not going to pay $20 for an item they can get for $10 just because its mfg in US. They wont. Because now you threaten their individual economics- and they CARE about that way before country economics.

And if demand for X wanes- guess what happens to that mfg facility with 200 line employees? The company is NOT going to continue operation and payroll simply because its "best for USA" lol.

its a joke of a plan that has no real end-game. It flies in the face of the real economics that are at play by every single consumer and producer in the US.

Also there's some stuff you can't just do internally.

Putting tariffs on imports that significantly consist of, say, diamonds and coffee, isn't going to cause diamond mines and coffee plantations to spring up in places that don't have diamonds and aren't suitable for growing coffee.

 

[efil4]

Also there's some stuff you can't just do internally.

Putting tariffs on imports that significantly consist of, say, diamonds and coffee, isn't going to cause diamond mines and coffee plantations to spring up in places that don't have diamonds and aren't suitable for growing coffee.

correct! its soo much more intricate than just boiling down to "trade deficit bad" - which is what Trump has done.

So then he pivots to "they need to buy more from US" - well same rules apply- Who in El Slavador wants to pay 2x the cost of X just because its produced in US?

No one.

I took ECON 101/102 and 200 level 40 years ago and STILL KNOW MORE than the President of the United States.

 

[longtime lurker]

Pennsylvania is a State that the Republicans don’t want to lose in ‘28, oh well:

Trump tariffs and federal cuts end planned $300M Pa. plastics plant and its 300 jobs

A promised federal loan has not materialized and Trump's tariffs are expected to increase project costs, backers said.

www.pennlive.com

 

[efil4]

correct! its soo much more intricate than just boiling down to "trade deficit bad" - which is what Trump has done.

So then he pivots to "they need to buy more from US" - well same rules apply- Who in El Slavador wants to pay 2x the cost of X just because its produced in US?

No one.

I took ECON 101/102 and 200 level 40 years ago and STILL KNOW MORE than the President of the United States.

Exactly what I'm talking about...wtf we gonna sell Vietnam??!

 

[Optimus Prime]

so you are basically on right track.

The cost of the tariff is paid by consumer. Not the country of origin, not the exporter, not the importer- the end user.
Keeling in mind that the MFG cost in China doesnt change. The cost of materials sourced in China to make X ( so long as material not from US ) doesnt change. The ONLY thing changing is the END PRICE.
The thinking? That Americans will STOP buying X because now it costs $20 instead of $10. Putting pressure on China ( because now orders are down, mfgs slows and layoffs happen etc etc ) to work some sort of deal. Conversely, they purport that we can MOVE those mfg into US.
But as you stated, if they are building NEW, there is a time element along with cost - now if that takes a total of 2 years, is the CONSUMER still going to want to by X at $20( thats what we would need to price to make a profit after all overhead/cost of mfg included )
Further, Americans on a budget are simply not going to pay $20 for an item they can get for $10 just because its mfg in US. They wont. Because now you threaten their individual economics- and they CARE about that way before country economics.

And if demand for X wanes- guess what happens to that mfg facility with 200 line employees? The company is NOT going to continue operation and payroll simply because its "best for USA" lol.

its a joke of a plan that has no real end-game. It flies in the face of the real economics that are at play by every single consumer and producer in the US.

Thanks

I thought that the importer does pay the tariff they just add it to the price so the consumer does end up paying it

And if the product doesn’t sell because we balk at the higher price it is the importer who eats the extra cost

Is that right?

 

[CoolBrees]

I literally build industrial facilities and have for twenty plus years.

I am the project executive, and sign all of the payment applications and I create the budget and approve the schedule.

Nobody is going to build shirt.

Unless the market is expanding a la Data Centers, they will just raise their prices.

The rule of thumb cost of constructing an industrial building is between $150 and $400 per square foot depending on the dock door style and count, the overall site power needs etc.

You are investing in something that is at least 75k square feet, or you are a retailer and don't count. So let's go low and put your base build project cost at $11.25MM. That is just for the (relatively) very small building and doesn't actually produce anything yet. Bank payments begin after the entitlements phase so add about $2-3 million to the cost to build.

Timeline for a facility to come on line, starting at Due Diligence on the dirt, is no shorter than 18 months. If you have a technical build (hospital, food processing) or a particularly difficult AHJ you can double - even triple - that timeline.

Equipment is going to cost at least half, if not more than the building itself (it depends on what you are doing of course. Brewery equipment is 2:1 more expensive than the building. Semi-conductor is 10:1).

So let's say we are making jeans and call it a cool $20MM all in. For a tiny site mind you. Companies at this scale are not publicly traded and cannot use equity as a lever unless they plan on taking on a very vocal partner - mostly likely a VC (vulture capitalist) or a bank if you are in good standing. Either way they are now telling you how to run your business. ROI is 36 - 48 months from signing so pray you don't have a schedule delay or you will find yourself having to claw back your business as an employee.

Or you can complete a TI on an existing facility. Pay triple net lease and deal with a LL. Your TI has to be doubly approved now (AHJ and LL) and you are at the mercy of the dreaded "existing conditions." But since a TI doesn't include the cost to build, you can likely move in on the same project for like $15MM. ROI is 30 months and under now as you only have equipment to buy so the terms of lending are very different. Depreciation is only 5 years so your equipment better be paid off before that.

This is all to say that the cost to add production is incredibly high and comes with massive risk to the existing operation.

In this instance it would be asinine to expand. Like you should be fired for trying to fill this vacuum. Nobody is building a GD thing that they weren't already going to build.

There is no new market. It's the same market with less suppliers. Which means raising prices, not Capex. This is simple Econ 101.

So anyone with a delusion that this is going to spur growth doesn't know the first thing about manufacturing capex.