Liberation Day

According to the interweb April 2 is National Ferret Day - a day to celebrate these lively and intelligent companion animals.  President Trump has declared that today is Liberation Day - and is kicking-off a Rose Garden celebration later today with a fresh round of tariffs on global trade.

It is no secret that the president and his minions have clashed with mainstream economists for just about forever over the merits of what White House economic advisor Peter Navarro has described as the largest peacetime tax increase in American history.  Beginning today I suppose we'll learn who's right as global reciprocal tariffs are announced; including a whopping 25% tariff imposed on big ticket items such as imported vehicles and overseas parts used in the assembly of automobiles. The president has promised these tariffs are permanent.

The president is insistent that tariffs will have the straightforward effect that manufacturers will move factories and assembly operations to the US thereby creating more American jobs and universal prosperity.  Of course, the president has not addressed the billions upon billions of dollars associated with re-shoring overseas manufacturing and supply lines that have evolved over decades.  Or the exceedingly long timeline associated with this.  A timeline long enough that he won't be president when American companies even get close to making it happen.

For those eggheads in the economic community the impact of tariffs is anything but simple.  Over the long run they might encourage domestic automobile production; yet in the short term they might also cause substantial collateral damage to jobs growth and the economy writ large.

Logically, the impact of tariffs will raise the price of imported goods discouraging the purchase of automobiles, damaging supply chains, reducing US car production and slowing the economy.  Stagflation - an economic portmanteau of slow economic growth combined with rising unemployment and persistent inflation would be an unwelcome ghost of Christmas Past; both here and abroad.

Earlier last month the President convened the CEOs of the country's largest automakers where he warned them: They better not  raise car prices because of tariffs. 

I suppose in the weeks and months ahead we'll learn whether (or not) retribution will be visited-upon automobile companies or their executives face punishment if they increase prices.

For the present, dealers have stockpiled a two to three month inventory of vehicles meaning that the impact of tariffs will not be manifest until late spring.  At that point, Morgan Stanley analysts have suggested that vehicle prices could rise 11% to 12% to offset the tax increase.

Meanwhile, I'm going to pay close attention to the market's response to this.  And while doing so I'll be pondering policy under this administration and whether (or not) it will improve your and my prosperity and general lot in life.  And maybe make the world a safer place.  Time will tell.....