Just a reminder/Tariffs could be more than just a one time reset of prices/Other good stuff

As a reminder, the 2018-2019 tariff war with China and others put US manufacturing into a recession by 2019 that resulted in the Fed cutting interest rates by the summer of 2019. As US manufacturing, and global manufacturing for that matter, has been in a recession for more than two years now, I guess we'll just prolong the pain.

Also, conventional wisdom is that tariffs are just a one time price set and thus not really inflationary past the initial year of implementation. Dell Technologies said last night, "Whatever tariff we cannot mitigate, we view that as an input cost. As our input costs go up, it may require us to adjust prices." One time? Maybe.

Barry Sternlicht in yesterday's earnings call for Starwood Property Trust, a stock we own, made the case and which I agree with, that tariffs can end up being more than just a one time price adjustment, particularly around rents which make up about 40% of core CPI and about 30% of headline.

After mentioning that multifamily starts are "down 60%, 70%. Industrial starts down 70%. Buying real estate today with today's interest rates, you're usually buying it way below replacement cost...That means, by the way, that rents have to rise in order to justify new construction in many cases", he then said "And with Canadian tariffs, for example, you'll see imports of wood, lumber, will be more expensive, creating additional shortages of housing. If steel prices rise, expect additional shortages of everything else in real estate because construction costs are going up. It leads to future inflation. If we have a continued shortage of multifamily, rents will rise."

Some more on this, "I was looking at some numbers in Denver the other day, going from 17,000 homes completed in a quarter to 3,000. You can see the patterns. Rents go up double digits. Those factor into CPI, and they're a third of CPI. And you'll see that probably in late '26, '27."

That sounds like setting the stage for more than just a one time price set higher in inflation in housing inflation after the current deceleration being seen.

Also, there is this hope that a stronger dollar will mitigate the tariff cost of imports that US importers will pay but what if the dollar doesn't stay strong? While the US has a large trade deficit, it is offset by a large investing surplus where foreigners own more US assets than we own of theirs. What if foreigners decide to start selling their US stocks or other assets? What if the massive amount of Mag 7 stocks they own are sold and that cash is repatriated and the dollar weakens as a result? Then we'll have a real problem.