Callie Cox, author of the blog OptimistiCalliewrote a great article last week on the impact of tariffs on the US Consumer. As you can see in the chart below from her website, tariffs will hit the US Consumer at the grocery store A LOT. The United States get roughly 90% of our fresh vegetables from Mexico and Canada. “Canada supplies 66% of our imported poultry and 51% of our imported pork.” she goes on to write. The tariffs will not just hit groceries either. Cananda and Mexico supplied 47% of our imported car parts. The Peterson Institute for Economics estimated that the tariffs proposed over the weekend would cost American households on average $1,200 per year. In short, tariffs, historically don’t work, as we saw in the Smoot-Hawley Tariff Act of 1930, which raised around 900 import tariffs by an average of 40% to 60% and was one of the leading causes of the Great Depression where we saw imports plummet and a flight of capital.
Now, as we saw over the weekend, PresidentTrump threatened 25% tariffs on Mexico and Canada and at the last minutedelayed the tariff start date by one month with both sides coming to anagreement. Hopefully President Trump isthreatening tariffs to bring back manufacturing jobs to the United States whichhave been decimated over the past 40 years. As you can see in the chart belowprovided by the Federal Reserve of St. Louis.
President Trump’s goal is to build up ourmiddle class through domestic manufacturing jobs. We believe that this part of his plan isaltruistic. We disagree with the way heis going about it by tariffing our closest allies and hopefully President Trumpwill continue to use rhetoric and not action to persuade foreign governments toinvest in the United States.
“This presentation is not an offer or solicitation to buy or sell securities. The information contained in this presentation has been compiled from third party sources and is believed to be reliable, but its accuracy is not guaranteed and should not be relied upon in any way, whatsoever. Fagan portfolio characteristics and holdings are subject to change at any time and are based on a representative portfolio. Holdings and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities listed.
Additional information including management fees and expenses is provided on our Form ADV Part 2. The actual return and value of an account fluctuate and, at any time, the account may be worth more or less than the amount invested. Bond Investments are affected by interest rate changes and the credit-worthiness of the issues held in the portfolio. A rise in interest rates will cause a decrease in the value of fixed income positions. Past performance results are not indicative of future results.”