Personal Wealth Management / Expert Commentary

Trump's Tariffs

There has been recent talk on tariffs. Tariffs are always bad economics, but these tariffs aren’t nearly big enough to cause too much trouble relative to the size of the global economy. The totality of both US tariffs imposed on foreign and retaliatory tariffs imposed on the US come to amounts that are 15-20% of the tariff-able total. This gets you to a total tariff of about $100 billion dollars, which is a tax that some government will collect. This is way too small to have a real impact on an $80+ trillion global economy. Is it bad? Yes! Is it a negative? Yes. But, it’s a small negative.

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Title screen reads: “Ken Fisher Speaks on Tariffs”

A man in a black sweater appears on screen and begins to speak. He is identified as Ken Fisher.

Ken Fisher: There's been way too much made about tariffs--tariffs are always bad economics, tariffs aren't good, tariffs are bad. But these tariffs aren't nearly big enough, and they're too easily substitutable for them to cause very much trouble relative to the size of the global economy.

Ken Fisher: The way to see that is to think of these in terms of what they are. The totality, both U.S. tariffs imposed on foreign, and retaliatory, imposed back on U.S., which come to, then, amounts that are 15 to 20% of the tariffable total. Which gets you to a total tariff of about $100 billion, which is tax that some government will collect.

Ken Fisher: That's what it is. It's tax that some government will collect. When you get right down to that, $100 billion global-tax increase isn't really enough to cause a big problem in what's an $80-trillion global economy. It's way too small.

Ken Fisher: Is it bad? Yes. Is it a negative? Yes. But it's a small negative, and it's even smaller than that, because so much of this is what can easily be substituted. For example, on the one hand, the Chinese tariffs against American soy beans get sold through a broker to some foreign country, like, let's say, to make up an example, the Netherlands. Who turn around, and for a brokerage commission, but only a brokerage commission, that would be less than 1%, sell it back to China.

Ken Fisher: Once you put something on a ship on the water, it's cheap to move it almost anywhere. And then other, of course, is the automobile tariffs, which are much discussed. The American autos sold into China, are not all, but are almost all manufactured in America by European manufacturers, who will instead sell from Europe into China, and then from America into Europe.

Ken Fisher: These tariffs will be much smaller than anything anyone talks about. Which is one of the reasons that, since they've been announced, the stock market's been pretty much doing nothing but going up.

“Investing in Securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice or a reflection of the performance of Fisher Investments or its clients. Nothing herein is intended to be a recommendation or a forecast of market conditions. Rather it is intended to illustrate a point. Current and future markets may differ significantly from those illustrated here. Not all past forecasts were, nor future forecasts may be, as accurate as those predicted herein.”

 

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