When the Tariffs Backfire
Because of their broad-based structure, the tariffs are actually forcing some domestic manufacturers to move production overseas.
Good Morning!
Here are today’s highlights:
Ford makes more cars in the U.S. than any other automaker. It’s still been hit hard by the tariffs.
The July jobs report came in weaker than economists expected and included numbers revised downward for prior months.
In this week’s video Lou Mosca offers a recipe for survival in the restaurant business.
A restaurant owner gets a devastating review from Gordon Ramsay but seizes the opportunity to begin anew.
THE TRADE WARS
President Trump announced higher-than-expected tariffs on dozens of countries: “President Donald Trump on Thursday finalized his long-awaited and much-delayed ‘reciprocal’ tariffs in a move designed to rebalance a global trading system that he argues has been tilted against the world’s largest economy. In a pair of executive orders, the president increased tariffs on merchandise from about 70 countries and raised the rate on products made in Canada, one of the United States’ largest trading partners, to a punitive 35 percent. Higher tariff rates were scheduled to kick in [today], but now won’t take effect for another week to give Customs and Border Protection officials time to prepare. However, the new tariff rate on Canada will still take effect [today], the administration clarified late Thursday.”
“U.S. diplomats led by Treasury Secretary Scott Bessent in recent weeks have reached trade deal frameworks with a handful of trade partners including the European Union, Vietnam, Japan, and the United Kingdom, sparing them from the stratospheric levies the president announced in April.”
“Those countries that have not agreed to new trade terms are being divided into three brackets: Countries where the U.S. enjoys a trade surplus will see their goods taxed at a 10-percent rate when landing on U.S. shores; merchandise from countries where the U.S. incurs a small trade deficit will be hit with a 15-percent tax; and products from all other countries will face extra customs fees running as high as 41 percent.”
“The U.S. average tariff rate, which began the year around 2.5 percent, will sit at 18.4 percent once the new levies take effect, according to the Yale Budget Lab.” READ MORE
The tariffs are harming some of the companies they’re supposed to help: “Dan Digre’s family business has been manufacturing speakers in Minnesota for 75 years, clinging on even as his U.S. competitors shut their factories and relocated to Asia. The company is the kind of American manufacturer that President Trump says his trade policies will protect. But since Mr. Trump began imposing tariffs on Chinese exports in 2018 in an effort to help U.S. manufacturers, Mr. Digre’s company, MISCO, has been forced to offshore some of its manufacturing. Tariffs have pushed up the cost of the foreign parts he needs for his U.S. factory, making it more economical to produce his speakers elsewhere.”
“For some companies, the tariffs are giving them a chance to compete with cheap imports, particularly from China. But for other manufacturers that do business globally, like MISCO, the tariffs are having the opposite effect. Stiff levies are cutting companies off from supplies and markets they depend on abroad, in ways that could undercut Mr. Trump’s goals, hurt small manufacturers, and weigh on the American economy.”
“Mr. Digre’s company has long manufactured speakers in Minnesota for export, including to a major customer in Canada. His firm relies on certain materials from China, the only place to get many small components needed for speakers. But Mr. Digre must now pay a 55-percent tariff on those Chinese imports.”
“As a result, manufacturing for that customer from the United States no longer makes sense. So Mr. Digre has shifted speaker production to a factory in China, where he will export directly to Canada and bypass the United States entirely.”
“Illogically, he said, the United States charges higher tariffs on speaker parts from China than finished speakers from either China or Vietnam, which also discourages U.S. manufacturing. ‘Making things here and exporting them isn’t really feasible as long as these tariffs are in place,’ he added.” READ MORE
