July 10, 2025 • 35 mins
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Tariffs have moved from economic policy to political weapons, and smart investors need to understand the real impacts on markets and portfolios.
In this eye-opening exploration of the tariff landscape, we break down the fundamentals of international trade policy and how it affects your investments. From the recent 50% tariff on Brazil (imposed for political reasons) to the unrealistic expectation of "90 deals in 90 days," we cut through the rhetoric to reveal what's actually happening in global trade negotiations.
The conversation tackles a critical misconception: who actually pays for tariffs? Despite claims that tariffs are paid by foreign countries, the reality is they're taxes on US importers. We explore how these costs get distributed between companies, suppliers, and consumers depending on profit margins and market conditions. Using examples from Nike sneakers to Walmart's thin-margin business model, we illustrate how tariff impacts vary dramatically across industries.
We also examine why important commodities like copper are produced abroad rather than domestically. The challenges of developing new mines, semiconductor plants, and manufacturing facilities require years of investment – making immediate high tariffs disruptive rather than constructive. Instead, we discuss how smart economic alliances with resource-rich friendly nations might better serve American interests.
For investors navigating this complex environment, we offer practical advice for portfolio positioning. With markets near all-time highs, we suggest selective investments in technology companies less affected by tariffs, potential opportunities in energy infrastructure (particularly LNG production), and maintaining balance with lower-beta investments including gold ETFs and cash positions.
What does the future hold for tariffs and trade policy? Will we see the current rhetoric translate into lasting economic change, or will pragmatism eventually prevail? Listen now to gain the perspective you need to make informed investment decisions in an increasingly unpredictable world.
Straight Talk for All - Nonsense for None
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Disclaimer - These podcasts are not intended as investment advice. Individuals please consult your own investment, tax and legal advisors. They provide these insights for educational purposes only.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Steve Davenport (00:02):
Hello everyone and welcome to Skeptic's Guide
to Investing.
Today, Clem Miller and I aregoing to discuss what's going on
with tariffs.
This may be the last podcast,or this may be one of 100
podcasts on tariffs and what'sgoing to happen, but we think
it's interesting to go back andlook at where we've been, where
(00:25):
we are and where we're going.
I think that if anybody has anyideas, please put it in the
comments section, because we'relooking for ideas as where this
can be going.
So today also, I want toannounce that we're going to put
video up of this on YouTube,and it seems as though the
(00:50):
powers that be have said that,in order to increase
distribution, you should have avideo as well as a podcast.
So, in search for morelisteners and more people to
influence with their financialIQ, we've decided to give video
a shot.
Again, we realized that theseare both faces for radio, but
(01:14):
we're driven to perform for morepeople and to influence more
financial wellness globally.
So we felt like we had to gowith the times and get a little
more technically savvy.
So you might notice someclumsiness at first, but we'll
figure it out.
So today, the news is that we'regoing to do a 50% tariff on
(01:40):
Brazil because we don't like theleader of Brazil and how he's
treating the former president.
Tomorrow it could be a tariffagainst Dunkin' Donuts because
we don't like the way they'remixing the lattes.
I don't know.
It's a continually changingworld and that's why we're
(02:02):
trying to figure it out for you.
So, clem, if you couldsummarize for me, you know,
today is the 10th and so august9th was the deadline and we've
july 9th to oh, july 9th was the90 days from liberation day and
(02:23):
we've got two countries who wehave agreements with, not 90.
So tell me, are the next 88coming in the next few days?
Or what do you think is theschedule that we're going to see
on tariffs and who gets donewhen and where Do you?
Clem Miller (02:40):
have the answers?
Do you have the answers?
So I don't think anybody hasfirm answers, steve.
And let me just say first ofall that you know, with the
video production, I hope I'm notturning off anybody with my
long, longish hair which I'vebeen growing recently in my
retirement.
(03:04):
So, I think there's a lot ofother things they're looking at
besides your hair.
The so-called Liberation Day,which sort of went with this
(03:26):
theme that Trump sticks withthat, the president sticks with
that somehow tariffs are goingto liberate us from dependence
on foreign powers, as measuredby bilateral trade deficits, as
(03:47):
measured by bilateral tradedeficits.
And, of course, I think many ofus realize that foreign trade
deficits are really not a goodmeasure of economic prowess.
And we can go into that alittle bit more, Steve, if you
want to.
But let me just say that Ithink recently you had this
(04:10):
90-day delay because the marketreacted so negatively to the
Liberation Day tariffs.
The 90 days ended on July 9th.
There was this expectation thatthere would be 90 deals in 90
days, which was completelyirrational.
I think all of us who knowanything about tariffs and
(04:34):
international negotiations knowsthat 90 agreements in 90 days
is ridiculous, is ridiculous.
So I am totally unsurprisedthat, uh, you had only a few, uh
, you know three agreements andeven then, uh, my understanding
is that only one is documentedActually, uh, the other two were
(05:01):
just sort of described, uh, ona truth social post, uh, but
only one was actually documented.
Uh, even then, those deals areprovisional, temporary, et
cetera.
So we hear that there areothers in progress.
You hear about the EU, you hearabout India, you hear about
(05:23):
Japan.
Japan, I understand, waswilling to negotiate something.
They sent somebody toWashington to talk to Steve
Bessette and my understanding isthat in effect this person was
this envoy from Japan, was kindof blown off by the
administration.
So I don't know if that was onpurpose or it was a mistake of
(05:48):
some kind?
Steve Davenport (05:49):
Do you think this is about just showing power
and the tariff deal is just amessage?
Is it?
Is there really?
Can we go back to like tariffs101 and try to say to people,
because I think a lot of peopleare confused about why there are
different tariffs for differentcountries?
(06:09):
I was originally in my Economics101 class.
The idea was less tariffs equalless friction.
So therefore goods move towherever it's best to
manufacture them and if thatmakes sense to manufacture in
Vietnam, it gets manufactured inVietnam.
(06:31):
And so the goods and thingsthat we move around the world
are there for a reason.
They have some advantage withlower cost labor.
They have some advantage withraw materials with lower cost
labor.
They have some advantage withraw materials and we put these
tariffs on because we feel likethis person is producing in an
(06:52):
area with very littleenvironmental controls and
therefore they have a distinctadvantage over US production.
And the tariffs are trying torectify what is a situation
that's somewhat unfair for onecountry or another.
Is that how you would definethe current environment?
(07:15):
Because it is confusing that wesay we have free trade, but
every country we're negotiatinga tariff in.
So if we're negotiating tariffsin every single country, then
there is no free trade in thisworld, right.
Clem Miller (07:32):
Well, I approach it a little differently, stephen,
the way you laid it out.
So there've always been tariffs, but tariffs there's always
been kind of a baseline oftariffs that each country has
and that's within a frameworkthat's governed by the world
(07:53):
trade organization, uh, whichformerly was called gat, uh,
general agreement on trade andtariffs, and it varies a little
bit by country, but it's quitelow, it's like 1%, 2%, 3%,
pretty much on average, andthat's the result of
multilateral negotiations thatarguably have been have had some
(08:20):
responsibility for economicgrowth during the 1960s to early
2000s.
Then you had multilateral tradeagreements like NAFTA, later
USMCA, the Trans-Pacific, thebiggest one of all, the European
(08:41):
Union, which aimed to eliminatetariffs altogether among those
countries, and that's actually agrowth, a way for growth to
increase.
So tariffs until Trump camealong, you know tariffs.
Steve Davenport (08:59):
Did the euro and creation of the eurozone did
it really eliminate the tariffsin between the countries?
And then there was just onetariff for the overall correct
european union.
Clem Miller (09:11):
Correct so, but it's still there's tariffs right
, yeah, well, within, okay, soamong, within the so-called
single market, the EU singlemarket, there are no tariffs.
Among the countries Outside,there is a single set of tariffs
(09:33):
among those countries, applieduniformly vis-a-vis outside
countries, and that's called.
There's a term for that whichis called a customs union.
So they've all agreed to applythe same tariffs to, you know,
imports from the us and japanand you know non-eu countries.
(09:54):
So so that's that.
(10:22):
But you know, I wanted to pointout that outside the whole
GATT-WTO framework, outside offree warrant, an exception from
the WTO rules and circumstanceswhere there are specific
competitive threats, wherethere's been some kind of
(10:45):
underpricing, intentionalunderpricing in order to tilt
the playing field against, say,a dumping.
Steve Davenport (10:57):
Right, exactly, that's called dumping, dumping
is an evocative term for simplycharging a price for a product
that is far less than the marketprice.
I just wanted to get back tothe basics because I think that
(11:18):
there's a lot of terms flyingaround and I'm not sure
everybody I mean.
I've heard about steel dumpingby China trying to take over our
steel industry, right.
I've also heard about you knownational security needs for us
melting aluminum Correct.
So I think that some of theterms I logically don't think
that Canada is doing this sothat our national security will
be weakened.
(11:39):
Is doing this so that ournational security will be
weakened?
I think it has more to do withtheir natural resources and
energy supply that it takes tosmelt.
But there's so many thingsbeing said in the media that I
think sometimes we have to getback to.
Is this really an issue ofnational security?
Is it really an issue ofdumping?
Is it really an issue of justnot being happy with a country
(12:04):
and how they're behaving, as wesaw today with Brazil and their
50% tariff?
Clem Miller (12:12):
But what was a very structured system of
anti-dumping duties, of nationalsecurity tariffs, of free trade
agreements, of WTO, has been ofthe day, as evidenced by trying
to link Brazil tariffs todropping a legal case against
(12:35):
the former leader who tried toundertake a coup in Brazil.
Steve Davenport (12:57):
That is really tariff by whim, correct I just
want to put in perspective someof the things you see are
significant issues like, Ibelieve the copper tariff is a
significant issue for ourhousing industry and a lot of
other industries, but the tariffon whether bolson, whether the
(13:20):
former president is indicted ornot indicted, seems to me to be
an overstep, or overreach.
Clem Miller (13:29):
Yeah, I mean, there are purely economic issues,
copper being an economic issue,and then there are political
issues, like the Bolsonaro inBrazil issue.
But even in terms of theeconomic issues, I think there's
a fundamental misunderstanding,in the sense that you can put
(13:49):
on a tariff and say that you'reputting on this tariff to try to
encourage domestic productionof a commodity domestic
production of a commodity but itcan take years and years and
years to actually have thatcommodity being produced.
It takes years to develop amine, for example.
It can take years to build asemiconductor plant Correct.
(14:30):
And Apple is going to take a fewyears to produce all their
iPhones in the US, right.
And then ratchet it up overtime, very much like you would
do with the I don't know if yourecall the CAFE standards, steve
, with respect to cars.
So you would have emissionstandards with cars, and
(14:52):
initially they weren't veryrestrictive, but over time, as
technology improved, youratcheted up the emission
standards, and so one could dothat with tariffs and start off
pretty low and then eventuallyhit higher levels.
But that's not what Trump isdoing.
Trump is putting on this hugetariff right away and it's
(15:16):
incredibly disruptive, rightthat is.
Steve Davenport (15:26):
Steve, that is, if he's actually going to do
that.
Yeah, I mean, is this just apublicity stunt?
Is this just trying to gethimself more attention on the
international stage?
Is this something that hethinks will change and resolve
(15:54):
grudges that have gone on withthe auto industry and other
industries not being treatedfairly by these countries that
export to the US?
I don't you think that we needto understand when he says that
billions of dollars are cominginto our coffers, it's really
client and some of theintermediaries in the trade in
between right, it's not aone-person benefits and everyone
(16:31):
else suffers, right.
Clem Miller (16:35):
Well, so the only transfer that's going on here is
between companies that importand the US government.
So when the US government putson tariffs, they're putting it
on US importers, and so they're,and it's paid at the port right
(17:13):
when the goods are released bythe importer to the government,
and so the government's takingin more money.
That is, the government istaking in more money, but the
money is coming in from the impincrement of of wealth to the US
economy.
It's just a transfer.
It's a tax, right, right, it'sa tax on US as a tax.
Steve Davenport (17:27):
it doesn't get borne completely by one party,
usually Right.
Well, what is a price increaseThere'll be.
You know some the, the importerwill say I'll lower my profit
margin.
I mean, if there's, if there's,a dollar of tariff, does
anybody have any research thatsays you know the dollar of
(17:49):
tariff gets?
I mean, I've heard it dividedalmost equally between the
consumer of the good throughincreased prices, the decrease
in margin for the importer andsome of it going to the US
government.
But it's not an all or nothingthing, right?
Clem Miller (18:10):
No, it's going to depend on, not just on the
particular industry but on theparticular company, what happens
.
You know it could be that theseimporters go back to their
suppliers overseas and say canyou cover the cost of the tariff
?
But you know, if the supplier'smargins are very narrow,
(18:32):
they're not going to do thateither.
So you could say that wherevermargins are already narrow, then
likely the cost will be borneby the buyer right, by the
customer Right.
Where margins are wider,there's some more room for, and
(18:52):
where there's less, yeah, wherethe margins are wider you have
less, you have more ability totake tariffs out of corporate
margins.
Steve Davenport (19:02):
Right, there's a spectrum of it gets absorbed a
lot by this or a little by thisgroup and it varies.
As I guess what I'm saying it'snot as described, as all of
this free money comes into theUS, to the US government through
the tariff and we're all justgoing to the government's going
to reduce debt.
(19:22):
The government's going to dosomething with that money that's
going to benefit all of society.
So tariffs are good.
That seems like the philosophythat's being projected by the
government and I'm not sure it'sanybody in economics would
agree with it 100%.
Is that fair?
Clem Miller (19:46):
I think the amount of tariff revenue that will come
into the US government is onlya small fraction of the income
that comes in through corporateincome taxes and through and
through personal income taxes.
So I don't think it makes up atall to any great degree the
(20:09):
income that is lost from, say,the you know taxes, reducing
taxes on the or keeping taxeslow on the wealthy.
Steve Davenport (20:18):
Yeah, I mean.
One of the best examples Iheard was that Nike, when they
make a sneaker in China, makesit for about $3.
And so if you put a tariff of30%, it now becomes $4.
But the ultimate sneaker isstill being sold in the US for
somewhere between $60 and $100.
(20:41):
Yeah, it doesn't, you know.
That can be absorbed by the endproducer and the consumer
probably doesn't see a change inthe pricing because the pricing
is so much anyway.
Clem Miller (20:57):
Right, it's going to be consumed.
It's going to be paid not byChina, by the Chinese producer.
It's going to be paid by theimporter.
It's going to come out of theout of the importers margin.
That is, it's going to it wouldof the importer's margin, that
is, it would come out of Nike'smargin.
When you have a margin that'sso wide, it's going to come out
of Nike's margin.
But when you have somethinglike Walmart, which has already
(21:21):
squeezed margins and squeezedtheir suppliers, becomes a much
more difficult circumstance.
And and in order to uh find outwho other than the consumer is
going to pay those, uh, thosetariffs, ultimately, and there's
another issue with this that Imean.
Steve Davenport (21:39):
we could go on on this topic all day, but
another issue that I thinkpeople need to understand with
something like copper is coppermines are some of the more
dangerous places to work in theworld.
You're going deep down, thelack of oxygen, the danger of
collapse.
These are not the places thatyou really want to have a huge
(22:04):
industry in this country, and so, because of the dangers and
because of the environmentaldamage, the US has decided that
it's better to import copperthan it is to produce it itself.
And there are richer mines invarious countries which are just
a product of the earth hasdifferent degrees of copper and
(22:28):
different types of the crust.
So how do we get to a pointwhere we're looking for more
semiconductor production andwe're also looking for more
copper?
Don't we have to figure outwhat the US population is going
to be better at doing, versusdeciding that we're going to
(22:50):
just punish everyone whoproduces everything for us?
Clem Miller (22:57):
You know, the smart approach is to develop economic
alliances, basically free tradeagreements, where you have, as
part of those free tradeagreements, where you have, as
part of those free tradeagreements, countries that
actually produce these minerals.
So it would be great if the us?
Uh didn't punish canada.
(23:20):
Uh, if the us had a free tradeagreement with australia, uh it,
which is also a big miningcountry, mining mining supplier
country.
Uh, if the U?
S had uh free trade agreementwith Chile, which also has a lot
(23:40):
of mining uh uh produce, if wehad free trade agreements with
those markets, we would be in?
Uh in much better shape.
Let's just take a look, steve,one more on the mining country
front Greenland, right, canadahas just signed a deal with
(24:01):
Greenland to develop its miningresources.
And the reason Canada was ableto do that with Greenland and
not the US is because the US wasthreatening them.
So the first thing you can dois not threaten.
The could try, we can aspire toit.
Steve Davenport (24:16):
So if we were to look, today, July 10th, and
(24:38):
where do you see, as we wrap up,this idea of tariffs?
Where do you see theopportunity for investors today
versus on Liberation Day withregards to tariffs?
Are there investmentopportunities for us to take
advantage of, or is this juststill a random walk that we
(24:59):
don't really know how it's goingto end up?
Clem Miller (25:03):
So I think right now, there are, in effect, uh,
two asset classes.
I'll call them asset classes.
They're not really assetclasses, but two types of
investments that I think areworthwhile.
One are the advanced technologystocks, uh, and the advanced
(25:28):
technology stocks uh not all ofthem, by the way.
I'm not talking about justinvesting in in qqq or or what
have you I.
I'm talking about selectiveinvesting in in technology
stocks, which, by and large, areor many of them at least, are
(25:53):
not affected so much by tariffs.
Right, I'm not talking aboutApple.
Apple is affected by tariffs.
Steve Davenport (26:00):
I'm talking more like quantum and some of
those AI.
Clem Miller (26:03):
Well, yeah, I'm talking, yeah, I'm talking.
Well, quantum computing is verysketchy and skeptic.
I'm skeptical about quantum atthis point.
Right, it's, it's, it's deck.
Some people have said it'sdecades down the line.
But you know, if you've got, youknow certain companies like
Nvidia, for example, um, you'vegot some of the companies that
(26:27):
provide power supplies to thecloud computing centers or
supplies in general to the datacenters.
I think those are greatinvesting opportunities.
So there's this one side of themarket where it's bifurcated.
There's this one side of themarket where you want to be in
(26:49):
sort of higher growth, maybehigher beta, but still you don't
want to be too risky.
You don't want to get intostocks that have high short
ratios or that have high pegratios, or at least super high
short ratios and super high pegratios, but ratchet up the beta
(27:10):
on that portion of the portfolio.
Then you got the other portionof the portfolio which helps to
balance off the high beta part,which would be lower beta, and
including a nice dollop of gold,the gold ETF, which I hold and
(27:31):
also cash.
Steve Davenport (27:32):
I look at the market as fully.
We're near all-time highs onthe S&P.
We've had an unbelievablerebound a rebound, I would say,
that has been somewhat naive interms of the impact of all these
things because they keepgetting pushed out.
So the tariff story was onethat created opportunity for
people to buy when there was somuch uncertainty in April and
(27:56):
people bought.
And now we're at a stage wherewe're at all time highs and
we're trying to move throughthose and it seems like we're
struggling.
So my recommendation to peopleis you just had a chance where
you wondered about whether youshould have sold and you held
off and didn't sell when it wentdown in April, but now you're
(28:17):
back to all-time highs.
So if you're at all-time highs,my rule is think about what to
take off the table and rebalanceand then you say, well, what do
I buy?
And I still believe that thebiggest revolution or the
biggest impact that Trump canhave is in our energy policy,
(28:40):
and I think that the vision ofLNG production on the two shores
one to produce LNG for Japanand one to produce from the East
Coast Germany I think that'sthe vision that I still have for
energy and I still believe thatif you were looking for
(29:00):
something that's lower priced,more reasonable, with some good
dividend yield, I feel thatthat's a place.
I agree with you that some ofthe technology won't be affected
by tariffs, but it feels to melike the multiples we're at make
that stuff a little bit lessattractive.
Clem Miller (29:20):
Right.
So, steve, one of the thingsthat I didn't mention when I was
talking just a little while ago, but you brought up, obviously,
the all-time highs, is on anumber of my higher technology,
higher beta stocks, the onesthat have reached some all-time
highs at various points over thelast couple of weeks.
I have put on some limit orderswhere, if the stock reaches a
(29:47):
particular price level, um, itwill automatically sell off.
It'll automatically sell so,and then I would capture those
proceeds, uh, either to keep itin cash or to uh invest in other
things.
So, uh, I've got, you know,I've already had a couple of
(30:07):
stocks reach the limit andhopefully in coming weeks or
months we'll see some other onesreach those limits and I'll be
able to pocket that money atthat money.
Steve Davenport (30:31):
Yes, I I think that, first of all, I want to
remind everyone this is foreducational purposes and we're
trying to tell people what we'redoing in our own portfolios or
with our own ideas, so that theycan think more broadly about
solutions.
The idea of selecting thecompany that's going to benefit
the most from tariffs is, in my,looking for a needle in a
haystack, because we don't knowtoo much about the national
(30:53):
situation.
We don't know if there's goingto be a bit of a whim.
I would have thought that theoil companies in Brazil would
have been a good investment ifwe knew that this 50% tariff
wasn't going to get imposed, butnow that it is that company,
all Brazilian stocks are downtoday.
So I think that this discussionis really about tossing ideas
(31:19):
around and trying to come upwith some strategies for people
to help improve theirunderstanding of markets.
Is there anything else you wantto finish up with today on
tariffs or any ending thoughtsyou have?
Clem Miller (31:38):
You know, I think that I think and I hope that by
the end of 2025, all of thisdiscussion of tariffs is going
to be old news, that not muchwill have actually happened and
(31:59):
will be beyond the issue.
That's my hope and sort ofsemi-expectation you know, sort
of semi-expectation.
Steve Davenport (32:12):
Yeah, I've kind of come to the conclusion that
tariffs, just like taxes, arehard because people will figure
out ways to get around them, andI think that you know, on
average the tariff is about 3%and we're talking about
increasing it to 10%, and Ithink that if we were to do that
with countries that we feelhave been unfair to us in trade
(32:34):
practices and other things andlower environmental standards,
then yes, I think that thedifference between 3% and 10% on
this percent of the stuff weimport to the United States,
that's a rectification of somepast misgivings or mistreatment,
but I don't think we're.
(32:55):
When we talk about 40s and 50%,I think what we're talking
about is really about news andtrying to make news, not trying
to make solutions.
So I would say that I hope itcalms down, I hope we start to
focus on good companies doinggood things and not focus on
who's mistreating who.
(33:15):
Standard is based a lot on thefact that we have countries who
are willing to produce aluminumand other things that we don't
want to produce in the UnitedStates because they're dirty or
(33:35):
because they're difficult orbecause they require a lot of
energy sources that are moreexpensive here.
So I think that practically, wetry to move things in a way
that's good for the economy andI hope we try to figure out how
to make these tariffs somehowbetter for the country.
And what I don't want to do iswin on the tariffs and go from
(33:58):
3% to 9% or 8% and then have nogoodwill with any of our trading
partners, because ultimately, Ithink goodwill matters and
that's how I'd like to end.
It is that everybody wants alittle more goodwill and we've
got to figure out a way to getalong with all of our partners,
the good, the bad and the ugly,as Clint Eastwood used to say.
(34:21):
So I think that's it for today.
I hope you enjoyed this podcastand I hope you'll share and
listen and give us some comments.
I hope you also enjoy the video.
So thanks everybody, have agood day.
Hello everyone and welcome to Skeptic's Guide
to Investing.
Today, Clem Miller and I aregoing to discuss what's going on
with tariffs.
This may be the last podcast,or this may be one of 100
podcasts on tariffs and what'sgoing to happen, but we think
it's interesting to go back andlook at where we've been, where
(00:25):
we are and where we're going.
I think that if anybody has anyideas, please put it in the
comments section, because we'relooking for ideas as where this
can be going.
So today also, I want toannounce that we're going to put
video up of this on YouTube,and it seems as though the
(00:50):
powers that be have said that,in order to increase
distribution, you should have avideo as well as a podcast.
So, in search for morelisteners and more people to
influence with their financialIQ, we've decided to give video
a shot.
Again, we realized that theseare both faces for radio, but
(01:14):
we're driven to perform for morepeople and to influence more
financial wellness globally.
So we felt like we had to gowith the times and get a little
more technically savvy.
So you might notice someclumsiness at first, but we'll
figure it out.
So today, the news is that we'regoing to do a 50% tariff on
(01:40):
Brazil because we don't like theleader of Brazil and how he's
treating the former president.
Tomorrow it could be a tariffagainst Dunkin' Donuts because
we don't like the way they'remixing the lattes.
I don't know.
It's a continually changingworld and that's why we're
(02:02):
trying to figure it out for you.
So, clem, if you couldsummarize for me, you know,
today is the 10th and so august9th was the deadline and we've
july 9th to oh, july 9th was the90 days from liberation day and
(02:23):
we've got two countries who wehave agreements with, not 90.
So tell me, are the next 88coming in the next few days?
Or what do you think is theschedule that we're going to see
on tariffs and who gets donewhen and where Do you?
Clem Miller (02:40):
have the answers?
Do you have the answers?
So I don't think anybody hasfirm answers, steve.
And let me just say first ofall that you know, with the
video production, I hope I'm notturning off anybody with my
long, longish hair which I'vebeen growing recently in my
retirement.
(03:04):
So, I think there's a lot ofother things they're looking at
besides your hair.
The so-called Liberation Day,which sort of went with this
(03:26):
theme that Trump sticks withthat, the president sticks with
that somehow tariffs are goingto liberate us from dependence
on foreign powers, as measuredby bilateral trade deficits, as
(03:47):
measured by bilateral tradedeficits.
And, of course, I think many ofus realize that foreign trade
deficits are really not a goodmeasure of economic prowess.
And we can go into that alittle bit more, Steve, if you
want to.
But let me just say that Ithink recently you had this
(04:10):
90-day delay because the marketreacted so negatively to the
Liberation Day tariffs.
The 90 days ended on July 9th.
There was this expectation thatthere would be 90 deals in 90
days, which was completelyirrational.
I think all of us who knowanything about tariffs and
(04:34):
international negotiations knowsthat 90 agreements in 90 days
is ridiculous, is ridiculous.
So I am totally unsurprisedthat, uh, you had only a few, uh
, you know three agreements andeven then, uh, my understanding
is that only one is documentedActually, uh, the other two were
(05:01):
just sort of described, uh, ona truth social post, uh, but
only one was actually documented.
Uh, even then, those deals areprovisional, temporary, et
cetera.
So we hear that there areothers in progress.
You hear about the EU, you hearabout India, you hear about
(05:23):
Japan.
Japan, I understand, waswilling to negotiate something.
They sent somebody toWashington to talk to Steve
Bessette and my understanding isthat in effect this person was
this envoy from Japan, was kindof blown off by the
administration.
So I don't know if that was onpurpose or it was a mistake of
(05:48):
some kind?
Steve Davenport (05:49):
Do you think this is about just showing power
and the tariff deal is just amessage?
Is it?
Is there really?
Can we go back to like tariffs101 and try to say to people,
because I think a lot of peopleare confused about why there are
different tariffs for differentcountries?
(06:09):
I was originally in my Economics101 class.
The idea was less tariffs equalless friction.
So therefore goods move towherever it's best to
manufacture them and if thatmakes sense to manufacture in
Vietnam, it gets manufactured inVietnam.
(06:31):
And so the goods and thingsthat we move around the world
are there for a reason.
They have some advantage withlower cost labor.
They have some advantage withraw materials with lower cost
labor.
They have some advantage withraw materials and we put these
tariffs on because we feel likethis person is producing in an
(06:52):
area with very littleenvironmental controls and
therefore they have a distinctadvantage over US production.
And the tariffs are trying torectify what is a situation
that's somewhat unfair for onecountry or another.
Is that how you would definethe current environment?
(07:15):
Because it is confusing that wesay we have free trade, but
every country we're negotiatinga tariff in.
So if we're negotiating tariffsin every single country, then
there is no free trade in thisworld, right.
Clem Miller (07:32):
Well, I approach it a little differently, stephen,
the way you laid it out.
So there've always been tariffs, but tariffs there's always
been kind of a baseline oftariffs that each country has
and that's within a frameworkthat's governed by the world
(07:53):
trade organization, uh, whichformerly was called gat, uh,
general agreement on trade andtariffs, and it varies a little
bit by country, but it's quitelow, it's like 1%, 2%, 3%,
pretty much on average, andthat's the result of
multilateral negotiations thatarguably have been have had some
(08:20):
responsibility for economicgrowth during the 1960s to early
2000s.
Then you had multilateral tradeagreements like NAFTA, later
USMCA, the Trans-Pacific, thebiggest one of all, the European
(08:41):
Union, which aimed to eliminatetariffs altogether among those
countries, and that's actually agrowth, a way for growth to
increase.
So tariffs until Trump camealong, you know tariffs.
Steve Davenport (08:59):
Did the euro and creation of the eurozone did
it really eliminate the tariffsin between the countries?
And then there was just onetariff for the overall correct
european union.
Clem Miller (09:11):
Correct so, but it's still there's tariffs right
, yeah, well, within, okay, soamong, within the so-called
single market, the EU singlemarket, there are no tariffs.
Among the countries Outside,there is a single set of tariffs
(09:33):
among those countries, applieduniformly vis-a-vis outside
countries, and that's called.
There's a term for that whichis called a customs union.
So they've all agreed to applythe same tariffs to, you know,
imports from the us and japanand you know non-eu countries.
(09:54):
So so that's that.
(10:22):
But you know, I wanted to pointout that outside the whole
GATT-WTO framework, outside offree warrant, an exception from
the WTO rules and circumstanceswhere there are specific
competitive threats, wherethere's been some kind of
(10:45):
underpricing, intentionalunderpricing in order to tilt
the playing field against, say,a dumping.
Steve Davenport (10:57):
Right, exactly, that's called dumping, dumping
is an evocative term for simplycharging a price for a product
that is far less than the marketprice.
I just wanted to get back tothe basics because I think that
(11:18):
there's a lot of terms flyingaround and I'm not sure
everybody I mean.
I've heard about steel dumpingby China trying to take over our
steel industry, right.
I've also heard about you knownational security needs for us
melting aluminum Correct.
So I think that some of theterms I logically don't think
that Canada is doing this sothat our national security will
be weakened.
(11:39):
Is doing this so that ournational security will be
weakened?
I think it has more to do withtheir natural resources and
energy supply that it takes tosmelt.
But there's so many thingsbeing said in the media that I
think sometimes we have to getback to.
Is this really an issue ofnational security?
Is it really an issue ofdumping?
Is it really an issue of justnot being happy with a country
(12:04):
and how they're behaving, as wesaw today with Brazil and their
50% tariff?
Clem Miller (12:12):
But what was a very structured system of
anti-dumping duties, of nationalsecurity tariffs, of free trade
agreements, of WTO, has been ofthe day, as evidenced by trying
to link Brazil tariffs todropping a legal case against
(12:35):
the former leader who tried toundertake a coup in Brazil.
Steve Davenport (12:57):
That is really tariff by whim, correct I just
want to put in perspective someof the things you see are
significant issues like, Ibelieve the copper tariff is a
significant issue for ourhousing industry and a lot of
other industries, but the tariffon whether bolson, whether the
(13:20):
former president is indicted ornot indicted, seems to me to be
an overstep, or overreach.
Clem Miller (13:29):
Yeah, I mean, there are purely economic issues,
copper being an economic issue,and then there are political
issues, like the Bolsonaro inBrazil issue.
But even in terms of theeconomic issues, I think there's
a fundamental misunderstanding,in the sense that you can put
(13:49):
on a tariff and say that you'reputting on this tariff to try to
encourage domestic productionof a commodity domestic
production of a commodity but itcan take years and years and
years to actually have thatcommodity being produced.
It takes years to develop amine, for example.
It can take years to build asemiconductor plant Correct.
(14:30):
And Apple is going to take a fewyears to produce all their
iPhones in the US, right.
And then ratchet it up overtime, very much like you would
do with the I don't know if yourecall the CAFE standards, steve
, with respect to cars.
So you would have emissionstandards with cars, and
(14:52):
initially they weren't veryrestrictive, but over time, as
technology improved, youratcheted up the emission
standards, and so one could dothat with tariffs and start off
pretty low and then eventuallyhit higher levels.
But that's not what Trump isdoing.
Trump is putting on this hugetariff right away and it's
(15:16):
incredibly disruptive, rightthat is.
Steve Davenport (15:26):
Steve, that is, if he's actually going to do
that.
Yeah, I mean, is this just apublicity stunt?
Is this just trying to gethimself more attention on the
international stage?
Is this something that hethinks will change and resolve
(15:54):
grudges that have gone on withthe auto industry and other
industries not being treatedfairly by these countries that
export to the US?
I don't you think that we needto understand when he says that
billions of dollars are cominginto our coffers, it's really
client and some of theintermediaries in the trade in
between right, it's not aone-person benefits and everyone
(16:31):
else suffers, right.
Clem Miller (16:35):
Well, so the only transfer that's going on here is
between companies that importand the US government.
So when the US government putson tariffs, they're putting it
on US importers, and so they're,and it's paid at the port right
(17:13):
when the goods are released bythe importer to the government,
and so the government's takingin more money.
That is, the government istaking in more money, but the
money is coming in from the impincrement of of wealth to the US
economy.
It's just a transfer.
It's a tax, right, right, it'sa tax on US as a tax.
Steve Davenport (17:27):
it doesn't get borne completely by one party,
usually Right.
Well, what is a price increaseThere'll be.
You know some the, the importerwill say I'll lower my profit
margin.
I mean, if there's, if there's,a dollar of tariff, does
anybody have any research thatsays you know the dollar of
(17:49):
tariff gets?
I mean, I've heard it dividedalmost equally between the
consumer of the good throughincreased prices, the decrease
in margin for the importer andsome of it going to the US
government.
But it's not an all or nothingthing, right?
Clem Miller (18:10):
No, it's going to depend on, not just on the
particular industry but on theparticular company, what happens
.
You know it could be that theseimporters go back to their
suppliers overseas and say canyou cover the cost of the tariff
?
But you know, if the supplier'smargins are very narrow,
(18:32):
they're not going to do thateither.
So you could say that wherevermargins are already narrow, then
likely the cost will be borneby the buyer right, by the
customer Right.
Where margins are wider,there's some more room for, and
(18:52):
where there's less, yeah, wherethe margins are wider you have
less, you have more ability totake tariffs out of corporate
margins.
Steve Davenport (19:02):
Right, there's a spectrum of it gets absorbed a
lot by this or a little by thisgroup and it varies.
As I guess what I'm saying it'snot as described, as all of
this free money comes into theUS, to the US government through
the tariff and we're all justgoing to the government's going
to reduce debt.
(19:22):
The government's going to dosomething with that money that's
going to benefit all of society.
So tariffs are good.
That seems like the philosophythat's being projected by the
government and I'm not sure it'sanybody in economics would
agree with it 100%.
Is that fair?
Clem Miller (19:46):
I think the amount of tariff revenue that will come
into the US government is onlya small fraction of the income
that comes in through corporateincome taxes and through and
through personal income taxes.
So I don't think it makes up atall to any great degree the
(20:09):
income that is lost from, say,the you know taxes, reducing
taxes on the or keeping taxeslow on the wealthy.
Steve Davenport (20:18):
Yeah, I mean.
One of the best examples Iheard was that Nike, when they
make a sneaker in China, makesit for about $3.
And so if you put a tariff of30%, it now becomes $4.
But the ultimate sneaker isstill being sold in the US for
somewhere between $60 and $100.
(20:41):
Yeah, it doesn't, you know.
That can be absorbed by the endproducer and the consumer
probably doesn't see a change inthe pricing because the pricing
is so much anyway.
Clem Miller (20:57):
Right, it's going to be consumed.
It's going to be paid not byChina, by the Chinese producer.
It's going to be paid by theimporter.
It's going to come out of theout of the importers margin.
That is, it's going to it wouldof the importer's margin, that
is, it would come out of Nike'smargin.
When you have a margin that'sso wide, it's going to come out
of Nike's margin.
But when you have somethinglike Walmart, which has already
(21:21):
squeezed margins and squeezedtheir suppliers, becomes a much
more difficult circumstance.
And and in order to uh find outwho other than the consumer is
going to pay those, uh, thosetariffs, ultimately, and there's
another issue with this that Imean.
Steve Davenport (21:39):
we could go on on this topic all day, but
another issue that I thinkpeople need to understand with
something like copper is coppermines are some of the more
dangerous places to work in theworld.
You're going deep down, thelack of oxygen, the danger of
collapse.
These are not the places thatyou really want to have a huge
(22:04):
industry in this country, and so, because of the dangers and
because of the environmentaldamage, the US has decided that
it's better to import copperthan it is to produce it itself.
And there are richer mines invarious countries which are just
a product of the earth hasdifferent degrees of copper and
(22:28):
different types of the crust.
So how do we get to a pointwhere we're looking for more
semiconductor production andwe're also looking for more
copper?
Don't we have to figure outwhat the US population is going
to be better at doing, versusdeciding that we're going to
(22:50):
just punish everyone whoproduces everything for us?
Clem Miller (22:57):
You know, the smart approach is to develop economic
alliances, basically free tradeagreements, where you have, as
part of those free tradeagreements, where you have, as
part of those free tradeagreements, countries that
actually produce these minerals.
So it would be great if the us?
Uh didn't punish canada.
(23:20):
Uh, if the us had a free tradeagreement with australia, uh it,
which is also a big miningcountry, mining mining supplier
country.
Uh, if the U?
S had uh free trade agreementwith Chile, which also has a lot
(23:40):
of mining uh uh produce, if wehad free trade agreements with
those markets, we would be in?
Uh in much better shape.
Let's just take a look, steve,one more on the mining country
front Greenland, right, canadahas just signed a deal with
(24:01):
Greenland to develop its miningresources.
And the reason Canada was ableto do that with Greenland and
not the US is because the US wasthreatening them.
So the first thing you can dois not threaten.
The could try, we can aspire toit.
Steve Davenport (24:16):
So if we were to look, today, July 10th, and
(24:38):
where do you see, as we wrap up,this idea of tariffs?
Where do you see theopportunity for investors today
versus on Liberation Day withregards to tariffs?
Are there investmentopportunities for us to take
advantage of, or is this juststill a random walk that we
(24:59):
don't really know how it's goingto end up?
Clem Miller (25:03):
So I think right now, there are, in effect, uh,
two asset classes.
I'll call them asset classes.
They're not really assetclasses, but two types of
investments that I think areworthwhile.
One are the advanced technologystocks, uh, and the advanced
(25:28):
technology stocks uh not all ofthem, by the way.
I'm not talking about justinvesting in in qqq or or what
have you I.
I'm talking about selectiveinvesting in in technology
stocks, which, by and large, areor many of them at least, are
(25:53):
not affected so much by tariffs.
Right, I'm not talking aboutApple.
Apple is affected by tariffs.
Steve Davenport (26:00):
I'm talking more like quantum and some of
those AI.
Clem Miller (26:03):
Well, yeah, I'm talking, yeah, I'm talking.
Well, quantum computing is verysketchy and skeptic.
I'm skeptical about quantum atthis point.
Right, it's, it's, it's deck.
Some people have said it'sdecades down the line.
But you know, if you've got, youknow certain companies like
Nvidia, for example, um, you'vegot some of the companies that
(26:27):
provide power supplies to thecloud computing centers or
supplies in general to the datacenters.
I think those are greatinvesting opportunities.
So there's this one side of themarket where it's bifurcated.
There's this one side of themarket where you want to be in
(26:49):
sort of higher growth, maybehigher beta, but still you don't
want to be too risky.
You don't want to get intostocks that have high short
ratios or that have high pegratios, or at least super high
short ratios and super high pegratios, but ratchet up the beta
(27:10):
on that portion of the portfolio.
Then you got the other portionof the portfolio which helps to
balance off the high beta part,which would be lower beta, and
including a nice dollop of gold,the gold ETF, which I hold and
(27:31):
also cash.
Steve Davenport (27:32):
I look at the market as fully.
We're near all-time highs onthe S&P.
We've had an unbelievablerebound a rebound, I would say,
that has been somewhat naive interms of the impact of all these
things because they keepgetting pushed out.
So the tariff story was onethat created opportunity for
people to buy when there was somuch uncertainty in April and
(27:56):
people bought.
And now we're at a stage wherewe're at all time highs and
we're trying to move throughthose and it seems like we're
struggling.
So my recommendation to peopleis you just had a chance where
you wondered about whether youshould have sold and you held
off and didn't sell when it wentdown in April, but now you're
(28:17):
back to all-time highs.
So if you're at all-time highs,my rule is think about what to
take off the table and rebalanceand then you say, well, what do
I buy?
And I still believe that thebiggest revolution or the
biggest impact that Trump canhave is in our energy policy,
(28:40):
and I think that the vision ofLNG production on the two shores
one to produce LNG for Japanand one to produce from the East
Coast Germany I think that'sthe vision that I still have for
energy and I still believe thatif you were looking for
(29:00):
something that's lower priced,more reasonable, with some good
dividend yield, I feel thatthat's a place.
I agree with you that some ofthe technology won't be affected
by tariffs, but it feels to melike the multiples we're at make
that stuff a little bit lessattractive.
Clem Miller (29:20):
Right.
So, steve, one of the thingsthat I didn't mention when I was
talking just a little while ago, but you brought up, obviously,
the all-time highs, is on anumber of my higher technology,
higher beta stocks, the onesthat have reached some all-time
highs at various points over thelast couple of weeks.
I have put on some limit orderswhere, if the stock reaches a
(29:47):
particular price level, um, itwill automatically sell off.
It'll automatically sell so,and then I would capture those
proceeds, uh, either to keep itin cash or to uh invest in other
things.
So, uh, I've got, you know,I've already had a couple of
(30:07):
stocks reach the limit andhopefully in coming weeks or
months we'll see some other onesreach those limits and I'll be
able to pocket that money atthat money.
Steve Davenport (30:31):
Yes, I I think that, first of all, I want to
remind everyone this is foreducational purposes and we're
trying to tell people what we'redoing in our own portfolios or
with our own ideas, so that theycan think more broadly about
solutions.
The idea of selecting thecompany that's going to benefit
the most from tariffs is, in my,looking for a needle in a
haystack, because we don't knowtoo much about the national
(30:53):
situation.
We don't know if there's goingto be a bit of a whim.
I would have thought that theoil companies in Brazil would
have been a good investment ifwe knew that this 50% tariff
wasn't going to get imposed, butnow that it is that company,
all Brazilian stocks are downtoday.
So I think that this discussionis really about tossing ideas
(31:19):
around and trying to come upwith some strategies for people
to help improve theirunderstanding of markets.
Is there anything else you wantto finish up with today on
tariffs or any ending thoughtsyou have?
Clem Miller (31:38):
You know, I think that I think and I hope that by
the end of 2025, all of thisdiscussion of tariffs is going
to be old news, that not muchwill have actually happened and
(31:59):
will be beyond the issue.
That's my hope and sort ofsemi-expectation you know, sort
of semi-expectation.
Steve Davenport (32:12):
Yeah, I've kind of come to the conclusion that
tariffs, just like taxes, arehard because people will figure
out ways to get around them, andI think that you know, on
average the tariff is about 3%and we're talking about
increasing it to 10%, and Ithink that if we were to do that
with countries that we feelhave been unfair to us in trade
(32:34):
practices and other things andlower environmental standards,
then yes, I think that thedifference between 3% and 10% on
this percent of the stuff weimport to the United States,
that's a rectification of somepast misgivings or mistreatment,
but I don't think we're.
(32:55):
When we talk about 40s and 50%,I think what we're talking
about is really about news andtrying to make news, not trying
to make solutions.
So I would say that I hope itcalms down, I hope we start to
focus on good companies doinggood things and not focus on
who's mistreating who.
(33:15):
Standard is based a lot on thefact that we have countries who
are willing to produce aluminumand other things that we don't
want to produce in the UnitedStates because they're dirty or
(33:35):
because they're difficult orbecause they require a lot of
energy sources that are moreexpensive here.
So I think that practically, wetry to move things in a way
that's good for the economy andI hope we try to figure out how
to make these tariffs somehowbetter for the country.
And what I don't want to do iswin on the tariffs and go from
(33:58):
3% to 9% or 8% and then have nogoodwill with any of our trading
partners, because ultimately, Ithink goodwill matters and
that's how I'd like to end.
It is that everybody wants alittle more goodwill and we've
got to figure out a way to getalong with all of our partners,
the good, the bad and the ugly,as Clint Eastwood used to say.
(34:21):
So I think that's it for today.
I hope you enjoyed this podcastand I hope you'll share and
listen and give us some comments.
I hope you also enjoy the video.
So thanks everybody, have agood day.
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