Latest / The Financial Exchange Show / Tariffs on Mexico get delayed by a month. How will businesses pivot?

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Tariffs on Mexico get delayed by a month. How will businesses pivot? · The Financial Exchange Show

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Speaker 2: Equity markets go splot. Equity markets go splot, Yeah, they do,
1:15
Speaker 2: they do. It's Chuck, Mike and Tucker with you, and
1:18
Speaker 2: we're kicking things off in February with a splot. Basically,
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Speaker 2: long story short, the Trump administration on Friday announced that
1:26
Speaker 2: they were going to be putting tariffs in place on
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Speaker 2: Mexico and Canada at twenty five percent for all imports.
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Speaker 2: They then also announced a ten percent tariff on China.
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Speaker 2: These were going to be effective on February one, on
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Speaker 2: February first, which was Saturday, they said they would go
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Speaker 2: into effect on February fourth, which is tomorrow. And one
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Speaker 2: key difference is that they did for Canada and Mexico
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Speaker 2: carve out a small exemption for energy products, which are
1:57
Speaker 2: going to be tariffed at a ten percent rate rather
2:00
Speaker 2: than the twenty five percent on everything else for the countries.
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Speaker 3: If this is equity markets going splat, what would be
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Speaker 3: be calling it if they were taking this very seriously
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Speaker 3: and going down five percent?
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Speaker 2: Splat splat? Okay, here's the thing. Multiple numbers of splats
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Speaker 2: is how we would There are all kinds of signs
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Speaker 2: out there that markets are not fully buying this still
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Speaker 2: and specifically the fact that they're not really down that much.
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Speaker 2: If if markets thought this was actually going to go
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Speaker 2: into effect and stay in effect for any extended period
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Speaker 2: of time, I think you are likely looking at closer
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Speaker 2: to like a five percent move on the S and
2:41
Speaker 2: P five hundred and the reason why is pretty simple.
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Speaker 2: When you look at the numbers. The sheer volume in
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Speaker 2: terms of trade that we do with Canada and Mexico,
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Speaker 2: it dwarfs every other country that we trade with, including China.
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Speaker 2: Might I add so Canada again, it doesn't dwarf China,
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Speaker 2: but the two together do.
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Speaker 3: Uh.
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Speaker 2: Canada we exported and this is data from calendar twenty
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Speaker 2: twenty one. It's the most recent year that I have
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Speaker 2: just in front of me. Canada we exported three hundred
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Speaker 2: and one I'm sorry, three hundred and seven billion dollars
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Speaker 2: of goods to them. We imported three hundred and fifty
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Speaker 2: seven total six to sixty five. Mexico exported two to
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Speaker 2: seventy six, imported three eighty four total six sixty one.
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Speaker 2: China we exported one fifty one, imported five hundred and
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Speaker 2: four six fifty five. So if you look at the
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Speaker 2: numbers here, Canada and Mexico are more than twice the
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Speaker 2: size or approximately twice the size of Mexico. When it
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Speaker 2: comes to the amount of trade that we do with
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Speaker 2: them and these three countries, that one point eight trillion
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Speaker 2: in trade that we do is almost forty percent of
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Speaker 2: the trade that we do on a global basis. In
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Speaker 2: that year twenty two one, we did about four point
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Speaker 2: seven trillion dollars in trades. So this is one point
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Speaker 2: a to that, and so it's it's it's a big
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Speaker 2: chunk overall. And in terms of what the Trump administration
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Speaker 2: is reportedly looking for, it is seeking the Mexican and
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Speaker 2: Canadian authorities to crack down on fentanyl crossing the border.
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Speaker 2: Uh and China is the largest supplier of illicit fentanyl
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Speaker 2: and so basically looking for something from them as well.
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Speaker 2: To this point, Canada's message has basically been, huh, you
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Speaker 2: want us to do what?
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Speaker 3: So according to Trudeau, about one percent of total fence
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Speaker 3: and all that's moved into the United States over the
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Speaker 3: last several years has come from Canada.
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Speaker 2: So he admitted, like one.
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Speaker 3: Percent percent too much, But there's no fentanyl coming from
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Speaker 3: the Canada.
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Speaker 2: The numbers are small and and again, you look at
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Speaker 2: the reaction of Canadians over the weekend, whether you're talking
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Speaker 2: about Canadian citizens, politicians, and basically the reaction is no, like,
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Speaker 2: you guys can go screw. That's kind of the message
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Speaker 2: that you're getting to the point where, like you have
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Speaker 2: liquor stores that are pulling us bourbon off the shelves
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Speaker 2: and things like that, you have.
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Speaker 3: Not because the government's telling them to, but rather because
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Speaker 3: they're saying.
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Speaker 2: They're saying, Okay, fine, you're going to do this. This
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Speaker 2: is what we're going to do back to you.
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Speaker 3: Yeah, I don't think it's coming entirely out of place
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Speaker 3: of zero fear. Like I think there probably is some
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Speaker 3: genuine concern from businesses in Canada that this is going
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Speaker 3: to hurt our business, but they're also looking at and saying,
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Speaker 3: what the hell are we supposed to do?
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Speaker 2: What are we going to do here? Is kind of
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Speaker 2: what Canada is saying. The Canadian government has also announced
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Speaker 2: that they are going to impose a retaliatory twenty five
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Speaker 2: percent tariff on about one hundred and fifty billion dollars
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Speaker 2: worth of goods that they export to the United States.
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Speaker 2: That's about forty percent of Canada's exports that they're saying
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Speaker 2: they are going to I'm sorry, of the sports from
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Speaker 2: the US to Canada that they're saying, yes, we're going to,
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Speaker 2: you know, have these tariffs in place on these as well.
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Speaker 2: The Mexican government hasn't really said much of anything, and
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Speaker 2: neither has the Chinese government, aside from just generally saying yeah,
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Speaker 2: we're not in favor of this, but they have not
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Speaker 2: announced any specific plans or anything else to this point.
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Speaker 2: So I think in terms of our discussion on this,
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Speaker 2: there are a few different points that we can cover.
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Speaker 2: The first and the one that everyone wants to know is, Okay,
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Speaker 2: how is this going to impact me? What's this going
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Speaker 2: to do to me? And the answer is, in the
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Speaker 2: short term, if these are imposed, and again it's this
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Speaker 2: can get pretty complicated if this draws out longer. But
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Speaker 2: in the short term, if this is imposed, you are
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Speaker 2: going to see the price of some imported goods go
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Speaker 2: up potentially fairly meaningfully.
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Speaker 3: How short term, because I think there's a big difference
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Speaker 3: here between all right, So we talked about markets taking
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Speaker 3: this seriously and part maybe part of the here is
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Speaker 3: that these are gonna last.
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Speaker 2: Two weeks and then negotiation is going to happen.
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Speaker 3: That is, I think a common thing that's being thought
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Speaker 3: about discussed in pieces like this, and markets are certainly
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Speaker 3: thinking if tariff' succests for two weeks, I'm not sure
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Speaker 3: that we see any sort of meaningful price increases.
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Speaker 2: No, you might see some sporadic ones here and there
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Speaker 2: in certain businesses and certain industries, but probably not much
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Speaker 2: quite honestly.
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Speaker 3: Yeah, I would agree with you there, And I don't
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Speaker 3: know that there's a distinct threshold where this starts to matter,
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Speaker 3: but certainly on perishable items. Right when we talk about
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Speaker 3: avocados from Mexico because the Super Bowl keep getting talked
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Speaker 3: about here, you do not import three months supply of
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Speaker 3: avocados because that's not how food works.
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Speaker 2: Well, the reason why is that you very quickly end
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Speaker 2: up with one week's supply of avocados because they will
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Speaker 2: go bad by next week.
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Speaker 3: Yeah, there's a common joke about how you know my
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Speaker 3: avocado is going to be perfectly right between like one
7:57
Speaker 3: and one fifteen this afternoon, and so yeah, you can
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Speaker 3: and import a whole.
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Speaker 2: Bunch of these things.
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Speaker 3: So certain items likely reflect the increased cost of terraces
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Speaker 3: faster than others.
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Speaker 2: I actually did just see it just cross my screen
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Speaker 2: from Reuter's. According to Mexico's finance minister, they just this
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Speaker 2: is the quote from them quote Mexico has enough resources
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Speaker 2: to absorb financial shocks and navigate global challenges after the
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Speaker 2: United States announced twenty five percent tariffs on its goods.
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Speaker 2: So at least the initial round for Mexico is okay,
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Speaker 2: I guess we're doing this that again. This is all
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Speaker 2: changing minute to minute at the moment. But a couple
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Speaker 2: things when we look at, you know, when this starts
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Speaker 2: to matter, there are certain industries where you're going to
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Speaker 2: have impacts now that are going to not result in
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Speaker 2: prices going up, but shortages of goods. The first place
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Speaker 2: that you're going to look is new home construction. There
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Speaker 2: is a ton of lumber that is imported from Canada
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Speaker 2: that goes into building homes pre market. I haven't looked
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Speaker 2: since it opened right now, but pre market lumber futures
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Speaker 2: were limit up. So basically the pre market circuit breakers
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Speaker 2: it was hitting them. And what this means and why
9:15
Speaker 2: I say this is going to matter if you are
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Speaker 2: a home builder unless you're like really big and really sophisticated,
9:22
Speaker 2: where there's like probably two or three companies nationwide. They
9:25
Speaker 2: do this, and they probably build I don't know, four
9:28
Speaker 2: percent five percent of our homes nationwide because there are
9:31
Speaker 2: no truly like giant home builders. You're not hedging your
9:35
Speaker 2: lumber costs. You know, the average builder who's building five
9:40
Speaker 2: properties a year isn't hedging their lumber cost They go
9:43
Speaker 2: to home depot or Lows or their local, you know,
9:45
Speaker 2: small lumber yard, and they buy what they need when
9:47
Speaker 2: they need it. That's how they do it. The price
9:51
Speaker 2: of this lumber is going to go up precipitously if
9:54
Speaker 2: this stays in place for any more than a couple
9:57
Speaker 2: of days. Like this is one area. So if you
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Speaker 2: are a home builder and you're saying, Gee, I need
10:02
Speaker 2: to sell this home for X in order to make
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Speaker 2: a profit, you immediately say, I can't build this house
10:08
Speaker 2: right now because I'm either not going to hit my
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Speaker 2: profit numbers or I'm not going to be able to
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Speaker 2: sell this house for you know what I want to
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Speaker 2: sell it for. And so this is you know, one
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Speaker 2: place where immediately you are going to see a significant slowdown,
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Speaker 2: if not almost a complete halt.
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Speaker 3: And when Donald Trump acknowledges on his social media platform
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Speaker 3: that there could be pain. I think that this is
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Speaker 3: part of that acknowledgment is I don't believe we need
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Speaker 3: to be importing so much Canadian lumber. We have plenty
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Speaker 3: here in the United States, and so there might be
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Speaker 3: some pain here. The question is how much you know
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Speaker 3: in April of twenty twenty one, you had lumber prices
10:48
Speaker 3: per thousand board feet hitting what was it, nine hundred, No,
10:52
Speaker 3: like fifteen hundred, fifteen.
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Speaker 2: I forgot.
10:55
Speaker 3: We're in the six hundreds now, But that's like you said,
10:58
Speaker 3: hit circuit We were down around four hundred and a
11:00
Speaker 3: few months ago, right, and you know pre COVID, So
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Speaker 3: lumber prices are up fifty percent in the last couple
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Speaker 3: months and today and what's what's the move today?
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Speaker 2: Well, it hit the circuit breaker at like seven percent.
11:10
Speaker 3: Yeah, I'm not really sure where it's going to continue,
11:12
Speaker 3: but yeah, it stopped trading up seven percent.
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Speaker 2: So all this is to say, it's going to be
11:18
Speaker 2: dependent on the specific industry and the specific product. There
11:21
Speaker 2: are other places. Why don't we take a quick break.
11:24
Speaker 2: The auto industry is a big one that we need
11:25
Speaker 2: to talk about, and so I think let's take a
11:27
Speaker 2: break here and then let's talk tariffs and autos.
11:30
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Speaker 2: All right, let's talk a little bit about the auto
12:41
Speaker 2: industry and specifically how they could be impacted by these tariffs.
12:45
Speaker 2: So couple things first, just like the prerequisite about talking
12:50
Speaker 2: about the auto industry, when a vehicle is built these days,
12:56
Speaker 2: even if it is assembled in the United States, there
12:58
Speaker 2: are often multiple parts or in some cases entire like
13:02
Speaker 2: components of the vehicle that may cross the border multiple
13:05
Speaker 2: times before that vehicle is built. Now, it's not with
13:10
Speaker 2: every vehicle, and this is more closely related to vehicles
13:14
Speaker 2: that are built in and around the Detroit area, just
13:17
Speaker 2: because again you've got factories basically on both sides of
13:20
Speaker 2: the Great Lakes that go into that supply chain. But
13:24
Speaker 2: you can have just as an example, an engine where hey,
13:27
Speaker 2: part of the work is done at a factory in Detroit,
13:29
Speaker 2: then it's shipped over the border in order to have
13:32
Speaker 2: you know, piston work done. Then it gets sent back
13:34
Speaker 2: in order to have you know, whatever I don't know
13:37
Speaker 2: enough about like cars to be able to tell you,
13:39
Speaker 2: like all the ins and outs. We got engine and piston.
13:42
Speaker 2: So I feel accomplished. I feel pretty good just having
13:45
Speaker 2: you know, done that, and then you know, you stick
13:48
Speaker 2: a fork in it and it's done. That's that's what
13:51
Speaker 2: I'm told. In any case, vehicles and their components can
13:54
Speaker 2: cross the border multiple times. And sometimes the way that
13:57
Speaker 2: tariffs are structured, and again it's not like we have
13:59
Speaker 2: a ton of experience with actual tariff implementation either, but
14:04
Speaker 2: sometimes the way tariffs are structured, generally, the way they
14:07
Speaker 2: are is using what's called a drawback, and a drawback
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Speaker 2: is the premise of hey, if I ship this over
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Speaker 2: the border at a cost of four hundred dollars and
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Speaker 2: it comes back at a cost of five hundred, that
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Speaker 2: four hundred is drawn back and the tariff is applied
14:21
Speaker 2: to that one hundred dollars difference. Got it, Okay? In
14:25
Speaker 2: this tariff order, it is clearly spelled out. Okay, and
14:30
Speaker 2: this is from uh, you know, the I'm looking right
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Speaker 2: now at you know, White House dot gov. So I'm
14:36
Speaker 2: reading straight from the source, straight from the source here, uh.
14:40
Speaker 2: And basically it specifically says that it applies to the
14:45
Speaker 2: value of all goods that are being transferred back and forth. Okay,
14:52
Speaker 2: So like again, let me, I'll read it here. Such
14:55
Speaker 2: rate of duties shall apply with respect to goods entered
14:57
Speaker 2: for consumption or withdrawn from warehouse for consumption hon or
15:01
Speaker 2: after twelve oh one am Eastern time, February fourth, twenty
15:04
Speaker 2: twenty five, except that ones have basically been in port beforehand.
15:09
Speaker 2: So it's it's very clearly spelling out. And then section
15:13
Speaker 2: G here by the way, which is sorry, there's just
15:17
Speaker 2: a lot here today. No drawbacks shall be available with
15:20
Speaker 2: respect to the duties imposed pursuing to this order. So
15:22
Speaker 2: so intentional, it's intentional. It's not just like something that's
15:26
Speaker 2: in omission. What this means good crosses at four hundred. Okay,
15:31
Speaker 2: Canada has said they're applying retaliatory tariffs. Great, you're applying
15:34
Speaker 2: twenty five percent there, Okay, you're four hundred. Now is
15:37
Speaker 2: a five hundred dollars cost? You better believe the Canadian
15:40
Speaker 2: company is gonna say, okay, we got to charge more.
15:41
Speaker 2: Send this back. So now they're making their same profit.
15:43
Speaker 2: They're charging it at six. Then there's another twenty five
15:46
Speaker 2: to the six, another one fifty. So now just from
15:49
Speaker 2: one in back border crossing something that previously might have
15:52
Speaker 2: been five hundred dollars, you've now got at seven to fifty.
15:55
Speaker 3: So American car companies today. Tesla off six percent, General
15:59
Speaker 3: Motors off six percent, all of them, basically more than
16:03
Speaker 3: tripling the losses that you're seeing.
16:05
Speaker 2: Hang out, we got far. We got breaking news now
16:07
Speaker 2: from Mexico's president who says tariffs are delayed for a month.
16:13
Speaker 2: It's unclear. This is just the chiron that came across.
16:15
Speaker 2: I don't know if that means Mexico's tariffs, Canada's all
16:19
Speaker 2: of them. I don't know if it's about retaliatory this,
16:21
Speaker 2: retaliatory that, but delayed for a month. Yep, And so
16:27
Speaker 2: here we go again. I get like, do we just
16:29
Speaker 2: not talk about this now? I don't know. I feel
16:32
Speaker 2: kind of stupid, quite honestly. Yeah, yeah, but I feel
16:36
Speaker 2: like I just wasted my entire morning. So Mexico's Shinebaum
16:39
Speaker 2: says tariffs delayed for a month.
16:42
Speaker 4: So this is a correspondent from News Nation saying that
16:46
Speaker 4: Mexico's president says she and Trump had a good conversation,
16:49
Speaker 4: reached a series of agreements. She says they are pausing
16:52
Speaker 4: tariffs for one month from now.
16:55
Speaker 2: Okay, so Mexico not made subject to these are we
17:00
Speaker 2: were going to talk? We got like forty two tariff stories.
17:02
Speaker 2: Do we just throw out the whole thing.
17:04
Speaker 3: I don't know, Chuck, this is the type of unpredictability
17:08
Speaker 3: that I genuinely despise.
17:10
Speaker 2: Right now, I don't know what to do. We got
17:15
Speaker 2: this little stack on tariffs. Yeah, are they going to
17:19
Speaker 2: announce something in twenty minutes?
17:20
Speaker 4: Probably probable to operate under the assumption that no.
17:25
Speaker 3: So let's just finish the conversation on autos, knowing that
17:30
Speaker 3: by three pm today, frankly, by ten thirty today, it
17:34
Speaker 3: could all be irrelevant. But the fact of the matter
17:38
Speaker 3: is that should any of this stuff actually be real,
17:43
Speaker 3: then the cost of vehicles, as you mentioned, are one
17:47
Speaker 3: of the spotlight items that would face massive increases.
17:50
Speaker 2: Here's the thing. So we now have to work under
17:52
Speaker 2: the assumption, I'm sorry, we have to work under the
17:54
Speaker 2: assumption that none of these are going into effect. I
17:56
Speaker 2: think we do.
17:57
Speaker 3: Yeah, if you've got the president of Mexico saying that
18:00
Speaker 3: there's been a one month delay, then that's an indication
18:04
Speaker 3: that it's all fake.
18:05
Speaker 2: So if that's the case, how do businesses deal with this? Because, like,
18:11
Speaker 2: let's say.
18:12
Speaker 3: That you you certainly do not move any manufacturing anywhere
18:16
Speaker 3: across borders by by nowhere.
18:19
Speaker 2: Set yourself up for like the one time when it
18:21
Speaker 2: is real, then you get completely caught.
18:24
Speaker 3: Like now you don't do anything, Like if you if
18:26
Speaker 3: you are an auto business, you deal with this. Yeah,
18:28
Speaker 3: if you're an auto business, if you are a manufacturer
18:31
Speaker 3: of goods, by no stretch of the imagination do you
18:34
Speaker 3: do anything that would move manufacturing, because it's not even
18:39
Speaker 3: clear from Donald Trump's announcements that's that that's one of
18:43
Speaker 3: his goals, right, Like everything's been about Fentonol, it's been
18:47
Speaker 3: about immigration.
18:48
Speaker 2: We want progress on these items. It hasn't been.
18:52
Speaker 3: We're really pissed that American auto manufacturers keep putting jobs
18:56
Speaker 3: in Canada and Mexico. It's not even been brought up.
18:59
Speaker 3: And so, yeah, this is the type of unpredictability that
19:03
Speaker 3: people have talked about.
19:04
Speaker 2: And we will see how big of a.
19:06
Speaker 3: Swing this ends up being today because quite frankly, the
19:11
Speaker 3: equity markets have already shaved off half their losses for
19:14
Speaker 3: the day.
19:14
Speaker 2: They have so or nearly half, not quite. I guess
19:18
Speaker 2: we're gonna have to figure out what to talk about
19:20
Speaker 2: for the rest of the day because admittedly, like we
19:23
Speaker 2: had a lot of stuff, So we're going to take
19:27
Speaker 2: a break and figure out what to do, and after
19:30
Speaker 2: that we will return Wall Street Watches next.
19:39
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19:42
Speaker 1: TFE show. Breaking business news is always first right here
19:47
Speaker 1: on the Financial Exchange Radio Network. Time now for Wall
19:52
Speaker 1: Street Watch a complete look at what's moving markets so
19:55
Speaker 1: far today right here on the Financial Exchange Radio Network.
19:59
Speaker 4: All markets are negative territory, however, not as bad as
20:02
Speaker 4: at the open, following the recent news that Mexico has
20:06
Speaker 4: announced that US terriffs will be delayed a month. That
20:10
Speaker 4: was again as of moments ago, ongoing situation which will
20:14
Speaker 4: continue to update you on Right now. The Dow is
20:17
Speaker 4: down by two hundred and two points, about a half
20:20
Speaker 4: a percent s and P five hundred is down by
20:22
Speaker 4: nearly nine tenths of a percent or fifty two points.
20:25
Speaker 4: NASDAC down one in a quarter percent or two hundred
20:29
Speaker 4: and forty points of rusted two thousand still selling off
20:32
Speaker 4: by two and a half percent. Ten year treasure reeled
20:34
Speaker 4: down by four basis points at four point five to
20:36
Speaker 4: two percent, and crude oil mostly flat now trading at
20:40
Speaker 4: seventy two dollars in fifty two cents a barrel. Several automakers,
20:44
Speaker 4: including General Motors, Ford, Stalantis, and Tesla seeing slight losses
20:48
Speaker 4: on the day in reaction to the tariff announcement over
20:51
Speaker 4: the weekend. Another sector taking hits today include the consumer
20:55
Speaker 4: goods sector. As Investor's Way, the implication of Trump's potential
20:59
Speaker 4: ten aris on Mexico impacting companies like Constellation Brands, the
21:04
Speaker 4: importer of Modello and Corona Bears. However, that stock is
21:07
Speaker 4: down by only two percent now after the recent announcement
21:11
Speaker 4: from Mexico. Other sectors taking a hit in reaction to
21:14
Speaker 4: the tariff announcement include retail steelmakers, railroads, transportation providers, restaurant chains,
21:20
Speaker 4: home builders, and solar stocks. Outside of tariffs, Tyson Foods
21:25
Speaker 4: posted for fiscal first quarter earnings that beat expectation, setting
21:29
Speaker 4: that stock up by three percent. PVH, the parent company
21:33
Speaker 4: to brands including Calvin Klein and Tommy Bahama, was downgraded
21:38
Speaker 4: by Wells Fargo to equal weight from overweight, saying it
21:41
Speaker 4: feels like a value trap due to mounting issues. PVH
21:45
Speaker 4: shares are down by six percent and as for earnings
21:49
Speaker 4: six this week. Pall Andeer reports after the closing bell today, Merk, Pfizer,
21:54
Speaker 4: PEPSI report tomorrow morning, followed by Google's alphabet and AMD
21:59
Speaker 4: tomorrow after noon. Nova, Noord, DIESC, Disney, Uber, and Qualcom
22:03
Speaker 4: report on Wednesday. Amazon, Eli, Lilly, Honeywell and others will
22:07
Speaker 4: post on Thursday, and nothing on the major on the
22:11
Speaker 4: earnings front on Friday. However, we do have the January
22:14
Speaker 4: jobs report due out on Friday morning. I'm Tucker Silvan.
22:18
Speaker 4: That's Wall Street Watch.
22:19
Speaker 2: So, as Tucker said, Mexico has the Mexican president has
22:24
Speaker 2: said that the tariffs on Mexico are delayed for a month.
22:29
Speaker 3: She's also announced border deployment of Mexican troops.
22:33
Speaker 2: Yeah, it looks like ten thousand Mexican National Guard troops
22:36
Speaker 2: being deployed to the Mexican US border. So you've got
22:41
Speaker 2: something there where you say, okay, like you know, here's
22:44
Speaker 2: the action that's being taken. I want to circle back
22:48
Speaker 2: just to the business impact, because if you're a business
22:54
Speaker 2: trying to make plans, you can't live under constant threat
23:01
Speaker 2: of tariff like you because you don't know like if
23:05
Speaker 2: they are or are not going to actually be implemented. Yeah,
23:09
Speaker 2: I don't really have any advice for somebody trying to
23:11
Speaker 2: figure this. If you're a business, be it large or small,
23:15
Speaker 2: and you're trying to figure out, Okay, what does our
23:17
Speaker 2: twenty twenty five look like? Okay, I'm going to expand
23:21
Speaker 2: this way, I'm going to expand that way. Let's use
23:23
Speaker 2: the homebuilder as an example. Hey, if you're trying to
23:26
Speaker 2: figure out how many permits to pull for this year,
23:29
Speaker 2: what do you do? I think probably not much, and
23:33
Speaker 2: that that may also be a real problem, like how
23:36
Speaker 2: much risk do you want to take on?
23:37
Speaker 3: Because I think right now the answer is you are
23:40
Speaker 3: doing as little as possible.
23:42
Speaker 2: When you say as little as like as little.
23:44
Speaker 3: New investment as possible, and that probably doesn't last forever.
23:49
Speaker 3: But there comes a point where, like, let's get a
23:53
Speaker 3: month out and assume that we're talking about this type
23:57
Speaker 3: of thing. There's only so many times a business will buy, Hey,
24:02
Speaker 3: I'm gonna face tariffs right and then get the rug
24:05
Speaker 3: pulled out for me last second. And so I'm sure
24:08
Speaker 3: there's different time periods for everyone out there, but there's
24:11
Speaker 3: a number of probably CEOs who are saying, this morning,
24:15
Speaker 3: all right, forget this, We don't think this person serious anymore.
24:19
Speaker 3: Let's move forward with plans because there are unlikely to
24:23
Speaker 3: be tariffs at any point in the near future, so
24:27
Speaker 3: on Mexico and Canada at least, again, it is really
24:30
Speaker 3: unclear what you're supposed to do with this information this morning,
24:34
Speaker 3: because as of twenty minutes ago, Mexico and Canada faced
24:39
Speaker 3: tariffs on twenty five percent on all of their goods,
24:42
Speaker 3: and apparently there was a good enough conversation to completely
24:45
Speaker 3: wipe the slate clean on that.
24:47
Speaker 2: So look, if there was enough progress made, there's enough
24:50
Speaker 2: progress made. But I'm sorry, I'm kind of sick of
24:53
Speaker 2: like feeling dumb about this. Like I keep telling everyone, Oh,
24:59
Speaker 2: like says he's gonna institute tariffs, you gotta believe him,
25:02
Speaker 2: And then every time that we're right up to it,
25:05
Speaker 2: it's not happening. And I'm not rooting for tariffs, but
25:08
Speaker 2: I'm I'm I guess I'm rooting to like believe him
25:11
Speaker 2: when he says he's going to implement these, and I'm
25:15
Speaker 2: rooting for our US president to be taken seriously. Well,
25:18
Speaker 2: I I just I don't know what to do, and
25:22
Speaker 2: I'm a little bit lost on it, quite honestly, Like
25:25
Speaker 2: I just I everything that you've been hearing from him,
25:32
Speaker 2: from his like other people in his administration is yes,
25:37
Speaker 2: we believe that tariffs are, you know, how we're going
25:39
Speaker 2: to help to equalize global trade. And I may or
25:42
Speaker 2: may not agree with that, Like, I don't know if
25:45
Speaker 2: I agree with it, but I want to see how
25:47
Speaker 2: it plays out, because they're talking about some really ambitious things.
25:51
Speaker 2: And I guess where I get to is, Look, if
25:54
Speaker 2: you're not actually gonna do it, then why'd you talk
25:56
Speaker 2: about it? Like, yeah, I don't.
26:01
Speaker 3: I don't have answers for people out there on this
26:03
Speaker 3: subject other than to say, unfortunately, Donald Trump's if it
26:11
Speaker 3: continues in this way, then you kind of have to
26:14
Speaker 3: take his promises with a grain of salt, which is troubling.
26:17
Speaker 2: Right Am. I at the point now where okay, I
26:21
Speaker 2: just have to work from the underli assumthing that we're
26:23
Speaker 2: not going to see any tariffs. I don't know. I
26:25
Speaker 2: don't know that I can do. Like, so we're gonna here.
26:29
Speaker 2: Here's what we're.
26:29
Speaker 3: Going to do is we're going to move on from
26:31
Speaker 3: tariff talk today because it seems irrelevant now.
26:36
Speaker 4: I mean, there's still Canada though.
26:38
Speaker 3: I understand, but if this is all it took for
26:40
Speaker 3: Mexico to get there to Canada, all right, then there's
26:43
Speaker 3: nothing that would convince me that ten minutes from now
26:46
Speaker 3: we're not going to see another what do you call
26:47
Speaker 3: those things Chiron's yes, yeah, the things that come across
26:50
Speaker 3: the TV called Cairns saying that tariffs on Canada.
26:54
Speaker 2: Are waived for thirty days.
26:56
Speaker 3: Like, it's just it's not possible to really take these
27:01
Speaker 3: conversations seriously when you have this big of a swing
27:06
Speaker 3: within thirty minutes. And so I think we do need
27:08
Speaker 3: to leave the tariff talk to itself for the day
27:12
Speaker 3: and let it work itself out because there's nothing else
27:14
Speaker 3: to talk about. Yeah, there's nothing else you can really
27:17
Speaker 3: summarize with all of this because you have no idea
27:19
Speaker 3: what's going to happen, as displayed by what just occurred
27:22
Speaker 3: in Mexico. So one more recap teriffs were in place
27:27
Speaker 3: to go into place tonight at midnight. They have apparently
27:30
Speaker 3: been granted a thirty day or one month waiver in
27:34
Speaker 3: the case of Mexico due to seemingly some action on
27:38
Speaker 3: Mexican military action near the border.
27:40
Speaker 2: That's all we know.
27:41
Speaker 4: Do they account for the shortened month of February?
27:43
Speaker 2: Do we know that? Good question question? Is it a month?
27:46
Speaker 2: Is it thirty days? It's not a leap years four weeks. Okay, okay, no,
27:51
Speaker 2: we left last year. I believe we did. Yeah, it
27:53
Speaker 2: was fun. I enjoyed leaping. Yeah. Let's talk a little
27:56
Speaker 2: bit about inflation. Peace. In the Wall Street Journal, inflation
27:59
Speaker 2: is down to three percent. Why that isn't good enough? Uh?
28:02
Speaker 2: And there's some stuff here that I buy. There's some
28:04
Speaker 2: stuff that I don't. The subheadline here I don't buy.
28:07
Speaker 2: Even inflation this low could feed consumer consumer frustration, workplace friction,
28:12
Speaker 2: and an inflationary psychology. I don't buy that, just because
28:17
Speaker 2: we've looked at the long term and by long term
28:20
Speaker 2: I mean going back to nineteen eighty inflation that we've
28:23
Speaker 2: had in the United States, and basically it's what we've
28:26
Speaker 2: experienced in the last year on an annual basis. So
28:30
Speaker 2: unless everyone is sitting there being like man, inflation's been
28:33
Speaker 2: awful for the last forty five years, I'm not really
28:37
Speaker 2: buying that this level of inflation is going to feed
28:41
Speaker 2: consumer frustration. It's much more in my opinion, Hey, if
28:45
Speaker 2: we've averaged two nine over the last forty five years,
28:51
Speaker 2: if core inflation basically gets to three and can't get lower,
28:57
Speaker 2: then you've got a problem where you not necessarily, you know,
29:01
Speaker 2: spending a lot of time down in the low twos,
29:03
Speaker 2: as we have for the last you know, twenty five years.
29:06
Speaker 2: But you've got an easy ping pong back up to
29:08
Speaker 2: four to five percent inflation if oil prices go the
29:11
Speaker 2: opposite way that they went last year at any time.
29:13
Speaker 3: Yeah, And I guess I'm comfortable saying that four to
29:16
Speaker 3: five percent inflation is something that genuinely frustrates Americans only
29:20
Speaker 3: because it's not something that we have experienced for the last
29:23
Speaker 3: forty five years. Two to three percent pretty darn normal.
29:27
Speaker 3: Four to five is outside the realm of normal. I
29:30
Speaker 3: don't know what we do in the three to four
29:32
Speaker 3: percent range, probably a little uncomfortable, but not something to
29:35
Speaker 3: write home about. But for the time being, Yeah, I
29:40
Speaker 3: just don't get worried about three percent inflation. To be clear,
29:44
Speaker 3: If you take the last few months of data, you
29:47
Speaker 3: get to more than three percent, and so I think
29:49
Speaker 3: that's some of the concern, right, if you're just looking
29:51
Speaker 3: forget about the last twelve months, but look at the
29:53
Speaker 3: last three months and annualize that out, we're we're on
29:57
Speaker 3: a pace for closer to four than we are three. Yeah,
30:00
Speaker 3: I mean, it's well isn't that just on headline CPI? True,
30:04
Speaker 3: Like core CPI has actually been better recently, and all
30:08
Speaker 3: the PC numbers, both core and headline have actually been
30:11
Speaker 3: better the last few months as well. So it's again
30:15
Speaker 3: the danger of core inflation settling. Like you core CPI
30:20
Speaker 3: right now? Is it three and a quarter?
30:22
Speaker 2: Yeah? If core inflation settles it three and a quarter,
30:25
Speaker 2: you've got a problem there because again there's an easy
30:29
Speaker 2: path back up to four or five percent inflation, and
30:32
Speaker 2: that path is very simple. It's okay. Instead of oil
30:35
Speaker 2: prices going from eighty to seventy last year, they go
30:38
Speaker 2: from seventy to eighty this year. Yeah, agreed. Let's take
30:41
Speaker 2: a quick break when we come back, let's talk a
30:45
Speaker 2: little bit about the possibility of tax cuts and where
30:50
Speaker 2: they stand as we kick things off in February.
30:54
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31:30
Speaker 2: All right, Michaelet's talk a little bit about the potential
31:34
Speaker 2: for tax cuts here. And I think that there's a
31:38
Speaker 2: piece in the Wall Street Journal that's kind of out
31:41
Speaker 2: of date already, but it's titled Trump's moved with teriff
31:44
Speaker 2: heikes out of tax cuts has spooked almost everyone. I
31:48
Speaker 2: don't really know what to say about the headline at
31:50
Speaker 2: this point, because again, if you're you're just tuning in.
31:54
Speaker 2: The Mexican President Qudia Shinbaum has said, and the White
31:57
Speaker 2: House has confirmed the tariffs on Mexico are now delay
32:00
Speaker 2: for a month, So I guess we get to do
32:04
Speaker 2: this all again a month from now. Still no word
32:06
Speaker 2: on Canada or China, but Mexico at least tariff's not
32:10
Speaker 2: going into effect for a month. But the question on
32:14
Speaker 2: this is, Hey, a lot of investors came into this
32:18
Speaker 2: year with the expectation that year one of Trump two
32:22
Speaker 2: point OHO is going to look a lot like Year
32:24
Speaker 2: one of Trump one point oh, and that hey, tax
32:26
Speaker 2: cuts are going to be a major feature of that,
32:29
Speaker 2: and to this point, still not really any noise about it.
32:32
Speaker 2: I mean, again, it's it's really early, like it's it's
32:34
Speaker 2: been two weeks, so I think that you know, look,
32:37
Speaker 2: you're not going to pass tax legislation in two weeks.
32:40
Speaker 2: But I think the question that still is out there
32:44
Speaker 2: in my mind is, Look, if you're gonna do the
32:47
Speaker 2: tax side of the equation in terms of reducing the
32:51
Speaker 2: overall amount of tax collected, then you have to have
32:54
Speaker 2: some real proof in the putting on the spending side,
32:57
Speaker 2: because this is not an economy where you want to
33:00
Speaker 2: go from six percent deficits up to eight or nine
33:04
Speaker 2: percent deficits with unemployments still at four percent.
33:09
Speaker 3: Yeah, there are two pieces to tax cuts getting done
33:11
Speaker 3: that are hurdles, and I just I don't really know
33:15
Speaker 3: how whether or not they're insurmountable. They are one piece
33:20
Speaker 3: that you just mentioned as deficits. And there are still
33:22
Speaker 3: Republicans in Congress that care about that. Uh, there are
33:26
Speaker 3: many that seemingly don't.
33:27
Speaker 2: There are a lot of people who should care about it.
33:29
Speaker 2: You know. It's it hasn't actually does matter. It hasn't
33:32
Speaker 2: really mattered for the last eighty years, right, but at
33:37
Speaker 2: some point like it probably will. I say probably, because
33:41
Speaker 2: I don't know for certain. Ye, And look, we're in
33:44
Speaker 2: some pretty dodgy territory and the Biden administration did not
33:46
Speaker 2: really do anything to actually help out with the deficit,
33:50
Speaker 2: in fact expanding it during the tenure.
33:53
Speaker 3: Right, And so the fact remains that if you cut
33:55
Speaker 3: terraffs without any corresponding revenue decreases, that are meaningful, right,
34:01
Speaker 3: because we can talk about the Department of Governm efficiency,
34:04
Speaker 3: but all estimates are that they're not going to do
34:06
Speaker 3: a whole lot on the spending side. So one there
34:09
Speaker 3: is the deficit hawk side of this. The other part
34:13
Speaker 3: is the salt piece. And I don't this doesn't affect
34:19
Speaker 3: a ton of taxpayers, but it is clearly delaying at
34:23
Speaker 3: least some of the conversations around task cuts because there
34:25
Speaker 3: are a number of Republicans elected to position in high
34:29
Speaker 3: tax states such as New York and California who are saying,
34:32
Speaker 3: we will not take action on any tax cuts without
34:36
Speaker 3: changes to those salt rules. And you know, frankly, those
34:41
Speaker 3: are rules that really only impact the highest earners in
34:45
Speaker 3: some of those high tax states, and there's a number
34:47
Speaker 3: of Republicans probably in other states who don't want to
34:49
Speaker 3: see that stuff go through. And so again, are any
34:52
Speaker 3: of these insurmountable, No, But those are the two things
34:56
Speaker 3: in my mind that really have to happen before Republicans
34:59
Speaker 3: can put together real tax fill If.
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36:18
Speaker 2: Mike, when you think of nicknames that you'd like to
36:20
Speaker 2: have in your life, is the pork king one of them?
36:27
Speaker 3: So? Were I the CEO of a major pork producer,
36:31
Speaker 3: then maybe, but I don't ever envision myself getting there,
36:34
Speaker 3: and so otherwise, the pork King seems like it would
36:37
Speaker 3: be quite quite derogatory where it's.
36:39
Speaker 2: You know, where I named after it. I would love
36:41
Speaker 2: to be the pork King. I mean, yeah, listen, the
36:43
Speaker 2: best would still be if I could succeed. Abe Frohman
36:46
Speaker 2: is the sausage King of Chicago. Sure, but the pork
36:49
Speaker 2: King sounds pretty good. So Smithfield Foods.
36:52
Speaker 3: But if you're a CIO of a major investment advisor
36:56
Speaker 3: named the pork King, doesn't that just add.
37:00
Speaker 2: A lot of questions? Maybe I like it that way fair,
37:03
Speaker 2: you know, maybe maybe that's what I want. Smithfield Foods
37:07
Speaker 2: so their CEO is Shane Smith, and he has helped
37:11
Speaker 2: to take the company public in was it last year?
37:15
Speaker 2: Last week. I don't know exactly when. Again, I'm just
37:19
Speaker 2: not paying that much attention to Smithfield Foods in general.
37:21
Speaker 2: But here's the thing. They are trying to make a
37:24
Speaker 2: big push to get more Americans porking up, because I
37:30
Speaker 2: do think pork it's kind of poop pooed and is
37:32
Speaker 2: kind of an afterthought in many families dinner tables. Yeah,
37:36
Speaker 2: it doesn't have the place of chicken.
37:37
Speaker 4: Not a lot of pork chops in my house.
37:39
Speaker 2: You know what the you know, the biggest problem is
37:41
Speaker 2: what Americans cook their pork horribly, yes, thank you. They
37:46
Speaker 2: overcook it to the point where it's inedible, and for
37:50
Speaker 2: that I blame the chef, not the meat, because we've
37:55
Speaker 2: got this fear of what is it a trick to
37:57
Speaker 2: something no siss or whatever, I forget what it is.
37:59
Speaker 2: There's in a case in US meeting like forty years.
38:03
Speaker 2: So I am very pro pork and I think Shane's
38:08
Speaker 2: gonna be successful. Y'all who are hating on it are
38:10
Speaker 2: just doing it wrong.
38:10
Speaker 3: See if there's a bacon commercial at the Super Bowl
38:12
Speaker 3: this year, step one.
38:14
Speaker 2: Even with even without bacon, Like, yeah, I love using
38:16
Speaker 2: the whole animal, and bacon is obviously delicious, but there's
38:20
Speaker 2: a lot of ways to play pork, and I'm in
38:23
Speaker 2: favor of the hoof. Quick Break Hour two coming up,