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Investment Strategy if Trump imposes Tariffs?

856 Views | 2 Replies | Last: 7 yr ago by Waltonloads08
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Old Buffalo
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AG
The winners and losers will be determined by the inelasticity of demand for their product. The more inelastic, the higher the sales price (passing on the tariff to the end consumer). So in that regard, I'd imagine you'd see little to no margin loss.

The industries where the demand is more elastic, on-shore producers are going to see the biggest gains, which is ideally the end result of such a tariff. Off-shore producers would likely increase their prices to meet margin goals, while on-shore would raise prices marginally to achieve further gains on sales (and still price lower than off-shore, gaining market share).

I think the overall S&P will not suffer a lot, but you're going to have large gainers and large losers for a net zero impact.

I do think that real estate will under perform in the Trump presidency as I think we're more likely to see rates rise.
Dr. Doctor
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AG
Things that are cheap are the ones that will probably be hit hard, if a tariff is imposed. It will come down to math; is it cheaper to build in the US with robotics (and a few higher paid staff to maintain them) or the 50k workers in China with the XX% tariff.

If a company is in business doing 'cheap' things, they could be hit. Those that make things that are not cheap, they should be better suited to either move back to the US (if they have a plant here already) or increase prices to offset any tariff.


I can think of a few examples. Phone cases (cheap) vs. phone (expensive). Seat for vehicle (cheap) vs. airplane (not cheap).

One potential wrinkle would be multi-national companies that have large supply chains (Boeing). While the overall cost of the plane built in the US could not change with a tariff, critical parts could increase which could cause some pricing changes. But I would also guess that Boeing's contracts might have a clause for changing the price due to trade issues. If their contracts are fixed priced, a tariff could impact the costs (assuming it was for large ticket items in a plane).

~egon
Waltonloads08
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AG
I would favor domestic small caps.
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