TAX and more TAX

[CUDA]

With post-inauguration day reality finally setting in, the head of General Motors' Canada division is now sounding the alarm. If Trump follows through with his plan to push forward with tariffs, decades of progress could be unraveled from the delicate North American auto industry supply chain, causing vehicle prices to spike. And that means the consumer will ultimately be the one who suffers.

“It is a disruption that is in no one’s interest, especially in the U.S.,” warned GM Canada President Kristian Aquilina during an interview with Bloomberg.

Aquilina's caution is one echoed by Canadian officials who have threatened retaliatory tariffs on the U.S. should the president push forward with his threats of duty fees of up to 25% for Canada and Mexico. And should any of those retaliatory tariffs be aimed at cars and trucks, well, it could spell disaster for any vehicle assembled in the U.S., regardless of brand.

This should strike up warning signs for manufacturers who set up shop domestically during the Biden administration in order to ensure that upcoming models can qualify for the EV tax credit, something which Trump also threatened to repeal when he took office. But don't forget about the countless other foreign and domestic manufacturers who produce legacy gas-powered cars in the States, either.

Many of these brands also have factories in Canada and Mexico which build components, powertrains, or entire vehicles that are then imported into the U.S. This could mean tariffs going in and tariffs coming out. And, again, a higher price tag on a vehicle's Monroney sticker.

It's not just the U.S. that could face higher vehicle prices, either. If a vehicle is assembled in the U.S. and exported to other markets (like 60% of the SUVs produced by BMW in South Carolina), it could ultimately be more expensive due to tariffs imposed on imported goods. Canadian residents in particular will also be affected, as an estimated 50% of the vehicles sold in Canada in 2023 were imported from the U.S.

During his inaugural address, Trump said that the U.S. would collect "massive amounts" of income specifically from foreign trade through a new agency he would like to have created called the "External Revenue Service"—meaning that the federal government would collect taxes by imposing tariffs on goods flowing in and out of the U.S.

No tariff reform was signed into office through executive order on Trump's first day, but reports from Reuters and other news agencies signal that the President will direct federal agencies to evaluate trade relationships with Canada, Mexico and China in February.

[David - WI]

It's possible we might see some short-term pain... at some point we have to all pay for the mistakes democratic leaders have been making for 50 years; but most of the B.S. you're spreading is from people who either don't understand or don't want to admit that they understand the long-term benefits.

[wogi]

Cuder, when are you going to help Make America Great Again?? Stop fighting it, you know you want to!

[doug7488]

[JPEROG]

Great day for America. Trump has always said "America first". If you want to sell stuff here,-build it here, such a simple concept. If you don't want to build it here then pay to enter the sales arena here-another very simple concept. There are many things that I own from Germany and I might need to pay more or switch brands in the future "something for me to decide". If I was a betting man, "we will see a big growth in U.S. manufacturing", is what's coming.

Joe

[BarryStrawn]

My opinion is they will make a deal and nothing much changes.

[FMP]

Tariff those clown shoes

[David]

It will be interesting. Historically, I can't think of any country that has successfully nurtured world class industry behind tariff walls. The Smoot Hawley act was not a success almost 100 years ago. What's different now is that I don't think first world manufacturing can complete with third world wages. It's possible tariffs on 3rd world countries make sense.

Note that in Trump 1.0, a lot of manufacturing moved from China to Vietnam and other 3rd world countries. There was no US manufacturing investment boom, like the spike under Mr Biden, or drop in the trade deficit. Perhaps Mr Trump will do a better job with tariffs this time. I wish he would leave Canada alone, but I doubt that will happen

[FMP]

The beneficial results of Trump policy were seen during the Biden Adm, Biden didn't cancel those which resulted in an increase in domestic US production by design.
What did happen is the US employment participation rate crashed and has not recovered to that level, flatlining and dropping again in the last two years. As anticipated, Biden caveman economics have resulted in the election results.

[David]

[FMP]

Take the massive artificial caused inflation out of that graph and it'll look closer to the participation rate.

West East should have been finished, cold weather refine in N ON , we'd have a better position.

[David]

The manufacturing investment is expressed as a percentage of GDP, so inflation is accounted for. The Biden experiment with subsidies was radical, and it would have been interesting to see if it was successful long term. Note that manufacturing investment is not the end goal.

1. Manufacturing could create well paying jobs and this would be the primary goal. If the investment was largely in automation, and the jobs were not unionized, this goal might not be achieved.
2. Manufacturing could bring back strategic products to the US, like computer chips.

What the data shows is that neither the Bush nor Trump tax cuts boosted investment in manufacturing. The Biden subsidies did boost investment. But now we may not find out if this strategy would be successful. As Canadians we know that competing against the Biden subsidies was crazy expensive. Look at the $ Canada's federal and provincial governments put into EV and battery plants. And Canada didn't try to match the US subsidies in other areas.

Intuitively, I'm not convinced that the government should be picking winners with subsidies, but I like data. I have no evidence to show that subsidies won't work. I don't think we will know if Mr Biden's experiment would have worked as it will be undone and replaced with a new experiment. Mr Trump won the election, so he can make that call.

Edit: the other big unknown is if the subsidized manufacturing plants will be profitable