It's clear now what this is really all about

While I was hoping the goal of this tariff policy was focused on reciprocity and lowering the overall rates that are charged to us via deals, the comments over the weekend from Hassett, Lutnick and Bessent reminded us again that this is all about the 'reordering' of global trade instead by punishing via higher costs thru tariffs on those companies, both domestic and foreign, that don't bring more manufacturing to the US.

Yes, we want to produce more here but doing it via lower regulations, lower corporate/income taxes, and the better training of skills, along with trade deals would have been so much more effective in knocking down trade barriers without blowing up the global economy.

For some reason, Vietnam continues to get beat up for its trade deficit with us. They send about $110b worth of goods to us while we send just $13b to them. But Vietnam is a country with a per capita income of about $4,000. What exactly can they afford to buy from us? Many there literally work 7 days a week making $10-15 a day and we're worried about our trade deficit with them? As more wealth is created there, they will buy more stuff from us but tariffs on them at a punitive rate will wreck their economy instead.

What if tariffs don't end up encouraging reshoring and does the opposite instead? In Friday's WSJ I read about Wisconsin based Husco "which makes engines and parts for automakers and other manufacturers" and has $500 million in revenues. They have three factories in the US, "as well as plants in India, China and Europe, which mostly produce for those regions." Rather than reshoring some of this production with tariffs, "the new tariffs are likely to lead Husco to shift some production out of its US factories. The new tariffs mean it will no longer be cost-effective to import components to make products for export." The CEO Austin Ramirez said, "It doesn't make any sense to do that, I'm going to have to make those products in another part of the world."

I'll argue too again, the obsession with a trade deficit and the belief that we're losing money when we have one is completely flawed. So, we have a nonsensical economic premise from which policy is being derived. Nothing good can come from that. I'll give this example again; Walmart has a large trade deficit with China by importing many goods from them that are sold in US stores. Is Walmart getting ripped off? No, as they benefit in terms of profits, we benefit as Walmart is the largest private sector employer in the country with about 1.6mm US employees, we get low cost products and China benefits on the manufacturing side.

And Nicole at Antonio's in Livingston, NJ who is cutting my hair on Friday, I'm going to have a trade deficit in services with her after I pay so she must be ripping me off.

Stretching out years from now in terms of time horizon, we also have to remind ourselves that about 75% of global GDP takes place outside of the US and will only grow over time. And, about 96% of the world's population lives outside the US. Our special privilege in this world of free market capitalism that has created the most prosperous and freest economy and society in the history of the world, with the foundation of the greatest living document in the world, that being the US Constitution, should not be taken for granted.

Also, I understand the frustration over wealth and income inequality that some of this stems from but where is the criticism of the Federal Reserve whose decades of easy money benefited those with assets at the same time turned the US housing market upside down via booms and busts and epic price inflation where for many young people right now it's unaffordable to buy a home. And all that misallocation of capital that cheap money incentivized.

As I did and I'm sure you did, we all read a ton of stuff on trade and tariffs over the weekend. I do though want to highlight the best thing I read on X and here is the link, https://x.com/StockSavvyShay/status/1908506134270665110