Comment – Tariffs, part deux

I’m sorry, but I’m having to double back again on last weeks editorial, as, on Friday,  Mr President stuck 25% tariffs on Canadian and Mexican imports to the USA, plus another 10% (on top of his last 10% during his first presidency) on China.

The Dow Jones Industrial Average dropped 0.8% on the news, and the CBOE Volatility Index (the US ‘fear gauge’) spiked on the announcement, although still within it usual range, but towards the upper end. See Barrons for a deeper dive.

The news is awash with interpretation, prediction and comment, as the US is a net importer of lumber and oil from Canada (for instance) but back within our world, how will this play out? The American Farm Bureau (AFB) which represents US farmers sent a letter to DJT on Friday in response. It’s not overwhelmingly positive for the impact on the US farmer, and makes the point that “every $1 of U.S. agricultural exports results in over $2 in additional domestic economic activity.” That will also stand for tractors and agricultural machinery.

Likewise, if the EU exports of agricultural machinery into the US are hit next with a 25% tariff (remember Donald wants Greenland) some of that kit can be displaced into other markets (ie Canada and Mexico) but there is still a c $2.5Bn surplus of tractors currently being imported into the USA (From EU, Canada, Mexico etc). Remember the proverb ‘May you live in interesting times’ Indeed.

In other news Electric cars may be about to get cheaper , not that it will impact the ag machinery supply chain that quickly, and Tata are testing on highway Hydrogen IC engined trucks in India. Interesting that they are the no 9 manufacturer in the world, above Volvo and Scania, and as we have seen with AdBlue, DPF etc.. what starts on the highway sooner or later edges off it..

Have a good week.

Andy