When all the tariff stuff got going in earnest late last year, I said that Trump needed to get it over this quickly so it didn’t become a political nightmare for Reps. He hasn’t, and it is lingering, and it is causing unease even among Reps. I also pointed out that the goals of tariffs, according to Trump were unclear, but there appeared to be three possibilities–one was reducing the trade deficit, one was getting revenue to reduce the federal deficit and one was returning manufacturing and manufacturing jobs to the US. There are lots of complex factors at work and it is early to see the total impact, but none of these goals is being achieved.
The trade deficit is actually higher, some of which is due to front-running and inventory loading before tariffs were imposed, but some is due to hostility to US exports by the countries Trump has angered with his heavy-handed approach. There is no meaningful decline in the US deficit, in fact it is growing. Tariff revenue is offset by tax revenue from other sources as some industry sectors decline. And there is no noticeable increase in manufacturing jobs. What is happening is that the inflationary effects of tariffs, which do raise the prices to business and individual consumers, are beginning to creep in. And that is affecting consumer confidence and finances and that will be a big negative to Reps. We have to keep Dems out of power and Trump needs to get past this tariff nonsense quickly or he will find himself in deep trouble.
Every manufacturer seeks the lowest manufacturing and distribution cost. One comment from someone in the manufacturing sector is that the location of production of a product is a function of the cost of the various components used in the manufacturing process.
For example the second largest cost in aluminum manufacturing is the electric cost of melting the aluminum which is around 30-40% of the total costs. Therefore that product is going to be processed in the location with the lower electric costs which tariffs are not going to be a factor. The same analysis of total costs will apply to almost every manufacturing decision