July 27, 2018 glacierinvest

I’ve been pretty outspoken about my view that the so called trade war wouldn’t have a material impact on the U.S. economy or consumer. My confidence in that view has been waning as more and more anecdotal evidence to the contrary comes to light. Earlier this week, I highlighted the tariff commentary from the Fed’s Beige Book survey of several businesses that claimed they were feeling the negative impacts of tariffs on their operations as a result of supply chain disruptions and input price increases among other sources of friction. Input prices have been increasing for some time but now it sounds like they’re being pushed even higher as a result of tariffs (primarily steel at this time).

To that end, GM and Fiat Chrysler both guided 2018 EPS lower as a result of steel tariffs. Whirlpool also claimed to be negatively impacted by steel tariffs. This opinion piece on Bloomberg references another on the ground perspective of the negative impact tariffs are having on U.S. businesses as well as pointing out that it may not be too long before the consumer begins to feel the bite of the trade war via higher prices.

I’m not necessarily throwing in the towel in on my view but I believe the probability of the trade war not having a negative impact on the U.S. economy, including the consumer is below 50% at this time. Now, more than anything I’m hoping something is done to alter the path we appear to be on because it’s hard to see how the economic situation gets better until someone gives in.