Given the volatility we are witnessing in the markets today, I wanted to share my thoughts and my plan to deal with it. As you have heard me say many times, I view these dislocations as opportunities and this is one I fully intend to take advantage of.

The markets are sending a clear message that the US is going too far with their tariff policy and the resulting retaliatory tariffs from other countries will be very bad for the economy. Their strategy is crude and obvious: slap a tariff on anything that is not made in the US to force companies to set up manufacturing in the US to avoid these tariffs. I am actually incredulous that they think this will work. I think this strategy will fail for the following reasons:

 

1. It appears as though the US Administration assumed that as soon as tariffs were put in place that countries and companies affected would immediately fall in line. I think they are genuinely surprised at the amount of pushback they are receiving.
    
2. The decision to transfer manufacturing from one country to the next is extremely complex, time consuming and potentially very expensive. Companies invest hundreds of millions if not billions of dollars in manufacturing plants and will not be willing to abandon those just because of tariffs. The 25% tariff on automobiles going to the US from Canada is a case in point. These supply chains have been developed over decades and can’t be dismantled overnight.
    
3. Trade partners with the US are now going out of their way to cut ties them and establish contingencies for the new reality.
    
4. Tariffs are extremely inflationary.
    
5. What will manufacturing even look like in 5 or 10 years? Will humans still be involved or will robots eventually replace them?
    
6. In less than four years, there will be a new President of the United States. I believe many companies will decide to wait this out rather than make billion dollar decisions based on the whims of the current administration.

 

When Donald Trump ran for President last year, he ran on a platform of lower inflation, bringing manufacturing jobs back to America and a new era of American prosperity. I believe that is what Americans voted for.

They did not vote for higher inflation.

They did not vote for higher unemployment.

They did not vote for a stock market crash.

They did not vote for a recession.

The tariff threats have been front page news in Canada for months now. I believe the average American has absolutely no clue what a tariff is or that they are going to be paying higher prices for many of their goods and in some cases, losing their jobs. I don’t believe they will stand for it and that is one of several reasons why I think this turmoil will not last and be short lived.

As for the market being down, I am starting today to pick away at opportunities I am seeing.

 

Don’t hesitate to reach out to me if you have any questions.