May 12, 2025 • 38 mins
Chuck Zodda and Mike Armstrong discuss the surprise US-China trade deal giving the global economy a reprieve. US retailers are facing post-tariff spending disorder. How will US-China deal impact deals with other countries. How to think about the stock market when earnings guidance becomes meaningless. Apple considers raising iPhone prices, without blaming tariffs.
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Episode Transcript
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Speaker 1 (00:00):
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(00:42):
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donation today. This is the Financial Exchange with Chuck Zada,
(01:06):
and Mike Armstrong.
Speaker 2 (01:10):
Monday, Monday Monday here on the Financial Exchange, Chuck, Mike
and talker with you, and we've got a pretty darn
significant rally taking place across all major US equity markets
on the back of the announcement earlier this morning by
I think it was Scott Besst and his counterpart with
(01:31):
China who originally had it during the nine am Geneva
Time press conference that they put out that terrorfrates between
the US and China are coming down significantly effective immediately.
Big thing that we're seeing each side stepping their terifrate
down by one hundred and fifteen percent, which I know
(01:51):
sounds like it's above the theoretical maximum, but it's the
percentage charged on goods that they're coming down by. So
the US reduced its terrorfrate on imports from China from
one hundred and forty five percent, which was a de
facto embargo, down to thirty percent. China in turn reduced
its tariff rate from one hundred and twenty five percent
(02:12):
down to ten percent, with both sides agreeing to a
ninety day pause and further talks before taking any additional action.
Speaker 3 (02:20):
So I think some context is helpful for how investors
and analysts were thinking about these talks going into this weekend.
On Friday, we talked a little bit about it. The
I would say kind of forecast out there ranged anywhere
from hey, these could land in the fifty to eighty
percent range when these talks are over, if there's some
(02:41):
negotiation done, And the conversation we were having was, well,
what it fits extreme to the other directions, Well.
Speaker 2 (02:48):
We talked about this. We said, look that you have to,
you know, consider possibilities outside of what the market is
pricing in. On the downside, it was, hey, what happens
if they storm out of the room and there's no
progress and we still hundred and forty five percent? And
on the upside, I think we said, look, the best
case scenario is probably getting to twenty percent, which was
where they were before April tewcond So when you say,
(03:11):
look we ended up at thirty percent, it's pretty darn
close to the best case scenario that we were discussing.
We said, look, we're not sure that this is particularly likely,
but you have to consider that this could happen. And
sure enough, that's that's what you ended up seeing here.
So I think when we talk about this, I'm less
concerned with like what actually went on during the negotiations,
(03:34):
just because I don't think it's particularly relevant or useful.
I also don't think we'll ever know, So no, you know,
expeculating on like, oh, like how did this? Who cares?
I think the important thing is, look, what is the
actual impact to the US economy at this point and
where do things go from here? And I gotta tell
you there's there's a lot of meat that we can
(03:56):
discuss in here. So first be obviously, you go from
one hundred and forty five percent, where companies are like, no,
we can't ship anything like that's that's kind of ludicrous
for us to even consider doing this. Uh So you
go from there down to a thirty percent teriff rate,
which from talking with people who again are you know,
(04:20):
importers of stuff from China, they say, yeah, it's not
gonna be as comfortable as you know where things were before,
you know, zero and then up to ten and then
up to twenty percent. But okay, I can figure out
how to run a business with tariffs at thirty percent,
even if my margins are impacted.
Speaker 3 (04:37):
Yeah, let's give this an example here, because again, I
think these get framed incorrectly in terms of how they
actually work. Very infrequently are we actually individually you and
I buying products from China to be shipped directly from
there to US. Usually it was through an intermediary who's
buying supplies to either finish manufacturing in the United States
or you know, build a finished product in China that
(04:59):
they doc on shelves here in the US. So you've
talked about a lot your friend with the board game company,
and I'm just gonna assume that his board games cost
fifty bucks and twenty one twenty one dollars.
Speaker 2 (05:10):
To make board games to make twenty one dollars to make.
So yeah, I fifty people.
Speaker 3 (05:17):
So I guess because because I mean, you know, we're
not talking about Monopoly. We're talking about like board games
and games that you know, people are passionate about, and
they're small.
Speaker 2 (05:29):
Kind of niche games.
Speaker 3 (05:30):
So I'm assuming that retail for what like fifty six
So he is a higher end board game manufacturer. So
we're talking stuff that is low triple digits, got it?
Speaker 2 (05:41):
Okay? So sells for one hundred costs twenty to make,
let's call it. Yeah.
Speaker 3 (05:46):
So previously that teriff rate was bringing the cost to
manufacture in the fifty to sixty range.
Speaker 2 (05:52):
Yes. And and by the way, I like because I
have numbers from him on like you went around and
like shopped this around. He was like, look, if I
wanted to make in the United States, it'd be ninety
three dollars for me to make it in the US.
And that's before handling any of you know, the shipping,
the selling to like yadie, like there would there would
be no profit for me if I were to do
that likewise at twenty dollars, you know, and you take
(06:15):
that up to a sixty dollars production cost. Again, think
about most companies. Their margins are not eighty ninety percent.
Margins usually are somewhere in the five to fifteen percent
range for most companies that are selling goods. So in
his case was basically, look, I'm gonna go from making
you know, ten percent on these to losing twenty to
(06:37):
thirty percent on every item that I sell. Right with
a tear. If at thirty percent, it's still probably assuming
that he eats all of the cost, which he's not
going to still eats through probably somewhere in the ballpark
of sixty to seventy percent of his profit right when
it's all said and done, is profitably be reduced by
somewhere around twenty to thirty percent as a result of this.
Speaker 3 (06:59):
Yeah, and again, so you're if you're cost of manufacturer
twenty bucks, you're bringing that up to twenty seven dollars
once you include the tariff passing along seven dollars a
price increase to a you know, a game that costs
one hundred twenty bucks, let's call it. That's you know,
even if you're just passing along half of it, it's something,
but it is probably not detrimental to the buyer.
Speaker 2 (07:20):
So this is something where you look at this and
you say, okay, so these these importers of goods from
China are going to if there's still you know, alive.
Because again, there are some companies that didn't plan, you know,
or didn't have the wherewithal to be able to even stomach,
you know, a four to five week situation like this.
(07:40):
So you have some that might have gone out of business,
not I don't know how many. I don't know you
know exactly which ones, but the ones that are around
will say, okay, we're gonna spool our factories back up.
We're gonna get things loaded onto ships, and we're gonna
get you know, everything moving. Now you've got the additional
costs that you've got to pay because of the tariff.
That's part one, Part two. Remember a lot of people
(08:02):
paused factory production in China at the outset of this.
When you start those productions back up, A, probably not
gonna be back up to full speed right away. B.
You better believe that all of those you know, big
old container ships that you know used to be coming
from China have since been rerouted to Okay, there's more
(08:22):
imports coming from Vietnam and Thailand, so great. Now we
got to get these ships back to China so they
can bring this stuff. And there's a lot more coming
because companies are gonna want to front run tariffs. The
people that I've talked to are saying that freight rates
are expected to go up anywhere from fifty to one
hundred and fifty percent, depending on the route and exactly
how much demand comes through. So where you land with
(08:46):
this is yeah, you're still gonna see some sporadic disruptions
of different goods and things like that that probably roll
through the course of the summer and into the fall
and maybe even early winter. It's it's like anytime that
you have a situation like this, you're not going to
have anything right back to how it was. Any of
those catastrophic situations are taken off the table here. But
(09:09):
the stuff that's going to be coming back in now
has a bunch of additional costs that's attached to it.
So the way that you deal with that is either
you eat it yourself, you pass it on to consumers,
probably some combination in both cases. What does that do
to corporate margins? And then what does it do to inflation?
And how do those things impact the US economy? You know,
(09:29):
those are kind of the next thing that we worry
about now. It's not because this is like all dooming goom,
but these are real things that we're going to be
seeing and having to deal with right now. They're real
costs that are being born either by companies or buy
and buyers of their goods.
Speaker 3 (09:45):
So as happened on April ninth, which was the rollback
of what was April second, again it was liberation Liberation Day,
is there a rollback of Liberation Day or at least
a significant portion of it. This seems to be a
rollback of one of the worst case scenarios for US
(10:05):
China trade, as well as trade for some other countries.
And that's kind of where I want to dig.
Speaker 2 (10:11):
In a little bit.
Speaker 3 (10:12):
Is we seem to have we now have set a
ninety day tariff rate for the United States in China.
I want to talk a little bit about that context
and what it might mean for trade and developments with
other countries whom we are going to negotiate over the
course of the next ninety days. Because China is unlikely
to be the last announcement on this front, so quick
break and tackle that next.
Speaker 2 (10:33):
Here on the Financial Exchange.
Speaker 1 (10:35):
Market volatility is at its highest point since the pandemic.
Keep it here for the most comprehensive coverage of the
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Wall Street Watch a full update on the market's performance
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Speaker 4 (10:56):
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Speaker 2 (11:29):
Mike, when we talk about the step down in terrace
between the US and China that was announced this morning,
you had some other kind of surrounding topics that you
wanted to touch on as well.
Speaker 3 (11:40):
Yeah, I guess I just wonder how this frames future
conversations that are had with other countries. I certainly think
in some of the easier to negotiate countries, even those
with a significant trade and balance with the United States,
it's tough for me to envision a scenario where the
rate of tariffs goes above thirty percent now for say
(12:03):
India or Vietnam or Japan. I mean, maybe I'm misreading
the situation, but if we've gotten to this thirty percent
level with China, it's difficult for me to envision a
scenario where country is other than like Iran or North
Korea that we don't trade with anyway, have teriff rates
that are substantially higher.
Speaker 2 (12:20):
Well, I think this is It's one where you could
probably see whatever happens with China as the ceiling. I
think the question is where is that ceiling? Like, is
there a compelling case that it's lower? Quite honestly, there is,
based on what Scott Beston said today, which is, hey,
like we're seeing, you know, some progress on fentanyl, and
obviously twenty percent of this thirty percent that's there is specifically,
(12:44):
but that the US is singled out because of fentanyl.
You could see a case where the US has you know,
the same teriff rate on China as the UK three
months from now, six months from now, or something along
those lines. I'm not saying that's right or wrong, or
that I agree with it. I'm just laying out the
pos because again, you have to consider the range of possibilities,
(13:04):
is all that I'm saying. On the other side of things,
the April second originally announced tariff rate would have taken
tariff's on China up to fifty four percent. Is that
still a possibility If things go badly. Sure, So I
think there's a range of kind of where that maximum is.
But this gets back to something that I said on
(13:28):
April third, immediately after, which is, look, this is not
the end of tariff uncertainty. No, it's the beginning. And
right now this is a continuation of that, simply because
I don't think there is any sense in my mind
that we have seen the final numbers for any country,
(13:48):
simply because I don't know that there are any final numbers, Mike,
I'm pretty close to comfortable that we've reached the final numbers.
With the UK, I'm not. I think they could go lower. Yeah,
I like, if you want, if you right now said hey,
for countries X, Y and Z, where do you think
these can go over the next year. I think the
(14:09):
UK can go lower. I think Vietnam can go lower.
I think Malaysia Thailand can go lower. I think the
EU could go higher. I think China could go either
higher or lower. Like there's a wide range, like you
go through country by country, and I don't think we
are at the final number anywhere, because I don't think
there is a final number. That's a constant negotiation. And
(14:31):
this gets to my I think where I've landed on this,
which is Hey, if that is the case, then until
you get to something that is not country by country
but instead sector by sector, I don't think you are
going to be seeing anything in terms of a meaningful
(14:53):
shift to producing.
Speaker 3 (14:54):
Stuff back in the US agreed there, which you're not
going to build a giant auto facility right.
Speaker 2 (14:59):
Now because you have no idea what tariffs. You're gonna
wait for more clarity. Yeah, there's no incentive to do
that here. And by the way, it's also been clear
that even in those key areas, those are even open
for negotiations. See what happened with the auto parts piece
of auto tariffs and how that was pushed back and
could be you know, delayed further. So in fact, in
(15:20):
the very short term, you're gonna see what might be
considered the exact opposite of manufacturing in the United States.
Because if you are Chuck's friend who makes board games,
or if you are any business at all right now,
you this morning at seven am sent a bunch of
notices to your Chinese suppliers saying, load up those boats
as fast as you possibly can. I want this stuff
(15:42):
in the country. I want more, you know, I want
triple my order. I'm borrowing money from the bank to
be able to triple my order or from whoever I
can in order to get this stuff into the United
States in the next ninety days. Pay the tariff that
I know is going to be thirty percent. And again,
why is that the opposite of manufacturing in the United States. Well,
because you are again not even considering moving that elsewhere.
(16:05):
You're not considering it moving it to India, Mexico, Vietnam.
Right now, you are purely saying, buy me the rest
of this year's supplies of this stuff, whatever I can
afford and whatever I think I can sell, and give
me a chance to think through what I want to
do next. Yeah, and get it all into the US.
So I think where I'm landing on this quite honestly,
(16:26):
in terms of again, I you listen to what people say,
and I think that's informative too, but it's I always
pay attention to what people do. The piece that is
apparent right now is that this is something that the
Trump administration wants to do as a revenue raiser. I
(16:46):
think that's pretty clear. And here's the thing, Mike. If
they don't, then let's ask kind of the big question
what is the point, because here's the thing, the tariffs
have not been in place long enough to do anything.
From a restoring perspective, Yeah, the step down in China
(17:06):
was bigger than people thought, which to me at least suggests, hey,
they don't want to target, they don't want some kind of,
you know, more direct confrontation with China. I'm not even
saying militarily, even economically, like you you could have easily
gone down to fifty percent or fifty four where you're
like wherever you wanted to there. The rest of the
reciprocal tariff rates are still paused for you know, another
(17:29):
sixty days at this point, and so if it's not
about raising revenue, what is it about.
Speaker 3 (17:37):
So I think that that might be the optimistic view
that hey, this is the goal, which is to raise
revenue to offset taxes, and I think that most certainly
from an investor perspective, that's one of the better.
Speaker 2 (17:49):
Case scenarios you can have out of all of this.
Speaker 3 (17:52):
I think, you know, ideally, from the stock market perspective,
you just want the free trade. But if the tariff
revenue as a goal to offset tax decreases is one
of the end goals here, then that looks pretty attractive
from a market perspective. The pessimistic viewpoint would be, there's
(18:13):
a vast difference of opinion within the White House as
to what the end goals are here, and they're just
reacting kind of weak to week to what markets tell them,
and that's that would be a concerning avenue if that
were what's going on here, And frankly, there's a little
bit of evidence of that. On April ninth, the evidence
was not that the Trump administration had a big change
(18:35):
of heart. The evidence was that bond investors forced them
to change their policy very rapidly. And the read that
I had was Okay, well did anyone think of this
ahead of time?
Speaker 2 (18:47):
And the answer is seemingly no. So I think this
is why again like trying to like pay attention to, hey,
what is in place and what does it say about
where they want to go? The piece that's still intact is, hey,
they want to raise some revenue. They've come out repeatedly saying, look,
the ten percent you know, global baseline tariff is going
to be in place and we're not changing that. That's
(19:07):
the baseline from which you have to negotiate on the
piece that I think is challenging. That is okay. Like
if if you view China and personally I do as
kind of the country with the worst trade offenses out there.
If thirty is the theoretical maximum, that's a pretty narrow
range that you're giving yourself on anything you know in
(19:28):
the future. Let's take a quick break. When we come back,
We've got Wall Street Watch after this.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter. Act
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch a complete look at what's moving markets so
far today right here on the Financial Exchange Radio Network.
Speaker 4 (20:00):
Are surging this morning after the US and China agree
to substantial tariff cuts for ninety days after constructive talks
in Switzerland over the weekend. Treasury Secretary Scott Besson also
said he expects to meet with Chinese officials again in
the coming weeks to get rolling on a more fulsome agreement.
At the moment, the Dow is up by over two percent,
(20:21):
or eight hundred and eighty nine points, SMP five hundred
up two point three percent or one hundred and thirty
four points. And the NASDAC now up three point two
percent or five hundred and seventy four points. Russell two
thousands up three point four percent, ten year Treasure reeled
up by six basis points, now at four point four
to three percent, and crude oil is up three percent today,
(20:44):
trading just below sixty three dollars a barrel. Big tech
sector rallying today on the heels of this tariff news. Amazon,
which sells many Chinese made products, up by seven percent,
Tesla up by five percent, in chip maker and video
up by over three percent. Apple also seeing gains today,
up over five percent. Separately, the Wall Street Journal is
(21:05):
reporting that the iPhone maker is weighing price increases for
its fall lineup, a step it is seeking to couple
with new features in design changes. The report adds that
Apple is determined to avoid any scenario in which it
appears to attribute price increases to tariffs on goods from China,
where most devices are assembled. Meanwhile, retailers also seeing big
(21:26):
gains on the heels of the tariff news. Restoration hardware
up seventeen percent, Best Buy up seven percent higher, five
Below up nineteen percent, and Home Depot trading three percent higher.
Speaker 2 (21:39):
Elsewhere.
Speaker 4 (21:39):
Several drug makers seeing attention today after President Trump yesterday
said he will sign an executive order today that would
reduce prescription drug costs almost immediately by thirty to eighty
percent to match prices paid by several other countries. ELI
Lilly and Johnson Johnson down by about a quarter percent,
while Pfizer is actually up by two per in. Shares
(22:01):
of Kindly MD rocketing over four hundred and fifty percent
after the healthcare company announced a merger with Nakamoto Holdings,
a bitcoin investment company founded by David Bailey, a key
cryptocurrency advisor to President Trump. Tucker Silvan, that's Wallstreet.
Speaker 2 (22:17):
Watch anything else we want to talk about as it
relates to the US China step down in tariffs.
Speaker 3 (22:26):
It's going to make its way into the theme of
the show all day today. So but now I don't
think I have any other major takeaways. There's gonna be
a rush to goods from China. Uh, there's going to
be really busy ports, really big busy container ships all
coming into the US at the same time. It'd be interesting, Actually,
I bet we were probably going to see some of
(22:46):
what we saw during COVID. Remember when there were all
those ships hanging out in the ports of Seattle and
la and all those places waiting to get unloaded. We're
probably going to see that how long does it take
for those ships to move?
Speaker 2 (23:00):
So? Well, here's the thing. So remember a lot of
these factories in China have been shut down to this point.
You gotta spoo them back up, which probably takes a
week or two.
Speaker 3 (23:10):
But there are some ships that are there are some
containers that were ready to leave port.
Speaker 2 (23:14):
There might not be ships there though. That's the thing,
Like the ships are. The ships are sitting there saying
if if you are Maresk, who is you know, one
of the five companies that basically carries like ninety percent
of all goods around the world. You're sitting there and
you're like, Okay, I got this boat that carries two
thousand containers. Am I gonna have it sit in Shanghai
(23:36):
waiting for containers that may or may not be loaded. No,
I'm gonna send it to Thailand and pick up something,
you know in the interim. Now, the problem is the
interim becomes Okay, I sent the boat to Thailand, it
takes three days to get there. Then I got to
load it for a few days, then it goes over
to the US for twenty days, comes back twenty more.
So it's like it's fifty days before that boat gets
back to Shanghai. Yep. So like this this is the
(23:58):
problem that you end up with. And this is why
you kind of sit here and you look out at
you know what's coming, and you go, oh, my goodness,
there's going to be so much stuff that is coming
in if you are a because here's the thing, if
you are a company, right now, like there's two different
ways that you can look at this, by the way,
and I think we'll see like both of these in
(24:20):
different respects. On one hand, you go, I need to
get everything I can right now because who knows where
these will go. On the other, you sit there and
you go, you know what, I waited thirty days and
they lowered the teriff weight from one hundred and forty
five to thirty. Maybe I'll wait at the ninety and
it'll go down to ten. It's a risk. I'm not
saying it isn't. Yeah, but like you can see the
(24:42):
thinking on it. You can.
Speaker 3 (24:45):
Has there been any announcement on those who paid the
one forty five no refunding interesting.
Speaker 2 (24:52):
Now, there weren't that many because it was basically like
the last week or so that you add, you know,
a smattering of ships that were coming through that way,
So there weren't that many. But in any case, like
you're just gonna see a ton of demand for transportation
services for anything related to stuff coming from China. Now
(25:12):
here's the other thing again, just kind of like thinking
through this. Let's say that I'm Vietnam. I know that
I can't be a country, but let's say that I
am a senior government official from Vietnam, because I don't
know how my my mountains would feel, you know, because
of this. But what I do know is, hey, if
I'm Vietnam and I see, okay, so you had one
weekend of talks with China and you reduce their tariff
(25:35):
rate by effectively like eighty percent, you know, from almost
one hundred and fifty down to thirty. I'm sitting here
and I go, what are you gonna do for me?
I'm sitting here at ten right now as Vietnam you
told me I was gonna be it. I forget what
the Vietnamese tariff rate was. I believe it was like
North It was really seven, or it was somewhere around
(25:56):
like forty five or fifty. And I sit there and
I go, Okay, So, like, what can I negotiate? Where
are you? You've got Lutnik saying the lowest I can
get to is ten, which is where I am. I
was at, like forty and change or fifty and change
somewhere in there. What am I trying to negotiate here?
Speaker 3 (26:17):
Right, especially in the context of one of the theories of
how you could negotiate good trade deals with the likes
of Vietnam, would be hey, make you know, make them choose, right,
who do you want to be a partner with US
or China? This new deal that you've announced is not
going to be paired.
Speaker 2 (26:32):
Why do I have to choose?
Speaker 3 (26:33):
Yeah, this is not going to be paired with a
bunch of tough negotiations with Japan, Vietnam, Malaysia saying hey,
either stop routing orders, stop doing all the stuff you're
doing to support China, or you're going to face massive tariffs.
Like no, we are working towards reconciliation with China as
part of this deal. So therefore, I don't think that
any of those are going to be faced with some
(26:55):
tough stance on China.
Speaker 2 (26:57):
So I think that that becomes something that's complicated. But
the piece that I think is interesting on this piece
in the the in the Bloomberg, that's what they call it.
US retailers are focing post tariff spending disorder. Okay, let
me let me think about like what that is. And
the subheadline is where you know, they kind of start
to get into it. The trade agreement between the US
(27:18):
and China is good news, but American consumers are likely
to remain hesitant.
Speaker 3 (27:22):
So can we talk about what we think we saw
when it came to hesitant consumers because I can only
point to like maybe three areas of hesitation on the
part of consumer.
Speaker 2 (27:32):
Yeah. The places that we sawt were in travel related stuff.
Speaker 3 (27:35):
So hotels and airlines yep. And fast food restaurants.
Speaker 2 (27:40):
Yes, those are two things.
Speaker 1 (27:41):
Was their third?
Speaker 2 (27:42):
Oh, hotels, airlines and fast food go. Yeah. Those other
than that like auto sales good up, No meaningful shift
and trend for things like electronics or home improvement supplies
or stuff like that. Nicer restaurants fine, some of them.
Others like you got into like that mid range and
like Chipotle and the those guys were struggling. Sure, you
know Starbucks was struggling, but they've been struggling, so like,
(28:04):
who knows if it's anything unique to this Starbucks tariffs? Yeah,
problem So I mean exactly, Starbucks has been in a
black hole, suck for like five years now, so I
don't think you can really tie anything to it.
Speaker 3 (28:16):
So I severely doubt that tariffs led to people consuming
less fast food. Correct, There's just no there's no line
that you can draw between the two. What you can say,
and this is you know reasonable, Hey, the lower end consumer,
it's completely tapped out. But that's not that's not a
teriff related thing, right. Could you make an argument that
(28:40):
tariffs and the market reaction to them was affecting travel
on airlines, hotels, airbnbs, and verbos? I would argue yeses.
I think, especially when you talk about foreign travel into
the United States, when you're looking at bookings of airbnbs
and verbos from Canadian citizens, for example, that's pretty clearly
signaled the downturn, and I don't think this is going
(29:02):
to reverse that. But on the other hand.
Speaker 2 (29:06):
The stories about Canadians boycotting US goods was before all.
Speaker 3 (29:09):
Yes, Chinese visitors to the US are not a massive
tourism block that we are. That we are usually concerned
about the other stuff that we were seeing on that end.
I just don't know that this is what reverses it.
I mean, certainly, I think if you are a business
owner who is pulling back on corporate travel, maybe you
(29:31):
greenlight it now after this these announcements. But Europeans aren't
going to be suddenly more excited to come back to
the United States. I don't know where this ultimately drives
any of those items.
Speaker 2 (29:43):
I think this gets me to kind of where I
am with the economic data the next few months right now.
Have no idea what the heck we're going to see.
Like the first again, the sub headline here the trade
agreement between the US and China's good news, but American
consumers likely to remain hesitant. Even if they were hesitant,
I don't know they would remain hesitant. I don't know
(30:04):
that that's even a fact that you have an evidence.
Speaker 3 (30:06):
I think you'll start to see fewer pulled guidance why.
I think basically that company, So here's what will happen.
Speaker 2 (30:15):
Can you have fewer pulled guidances when we have two
sets of ninety day windows that we have to get through.
Speaker 3 (30:20):
Because I think you'll basically give guidance saying, well, if
we assume the tariffs stay where they are now, then
this is our guidance. The guidance might not be terribly useful,
but it'll be better than companies saying we don't have
any guidance.
Speaker 2 (30:33):
Maybe. I mean, why, here's the thing. If you've already
pulled it, you're gonna put it back in. What's what's
the upside to you? Like, if if you've already pulled
your guidance, what's the upside now to putting it back in?
There is none? Like the only thing that can happen
if you're right. Okay, great, you're right anyways, and your
(30:53):
stock will you know, do what it does if you're wrong,
Why would people trust your guidance? Again? Yeah, So I
don't know. I kind of look at it, and again
I just view the next few months. We're gonna have
data that's all over the place. You're gonna have some
things that are showing massive spikes and activity. You're gonna
have some things again, people loaded up on cars before
(31:15):
all these tariffs. By the way, the twenty five percent
imported auto tariffs still in effect yep, so like and
those are stacked by the way. So here's the funny thing.
You buy a car, like you buy a volks you
buy a BMW right now that's not made in the US,
which are like most of their sedans because they it's
not like economically feasible to do that. Here, you buy
(31:37):
a BMW five series right now, you're paying a higher
tariff rate than you are in a sweatshirt from China. Likewise,
you buy a land Rover or Jaguar from the UK.
Speaker 3 (31:47):
You're facing a lower tariff than if you import, if
you buy a Ford from Canada.
Speaker 2 (31:53):
So like, there's there's all kinds of weird stuff right now.
And this is why I say, like the data is
gonna be all kinds of weird. You're gonna have some
things that look like they're going through the roof for
the next couple of months, and things like auto sales
that have been pulled over, pulled forward like what happened.
Would anyone be surprised if auto sales decline it like
a five or six percent seasonally adjusted rate. No, because
(32:15):
they're just reversing what they did the last couple months.
Market's last peaked in February. Let's take a quick break.
Speaker 3 (32:20):
I want to talk about some contexts in terms of
where markets are right now, because big daily swing. Obviously
on the China US Trade News. We'll cover markets next
here on the Financial Exchange.
Speaker 1 (32:30):
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That's visit USBI dot com. Chuck.
Speaker 3 (33:31):
We were talking a little bit before about just markets
and contextualizing where we have gone so far this year.
So S and P five hundred is basically now flat
for the year. We started January two at fifty eight seven.
Speaker 2 (33:44):
Flat for the year.
Speaker 3 (33:45):
It's flat since the election. Flat since the election. Now
we are in the election. The gap between the day
of the election in the day after the high for
markets was reached February nineteenth, were a couple percentage points
off of that all time high. A couple We're about
five okay, yeah, so five percentage points off of that
all time high reached in mid February. And there's a
(34:09):
number of different ways to read that. I tend to
think that the recession risk is still higher than it
was on election day markets again taking an optimistic viewpoint
here of where tariffs go, where tax rates go, presumably,
and a whole slew of number of different things. But
for some context, that's where things have gone. Obviously, at
(34:30):
their worst, we were off about twenty percent on the
market downturn on the S and P five hundred, and
so what worries me is the same thing that I've
been talking about for a while, which is the average
retail investor with this type of whiplash historically has gotten
pretty badly hurt because they tend to react a lot faster.
They tend to selwyn news is bad, buy win news
(34:53):
is good. And if you're finding yourself, I guess in
that position of second guessing your own moves today, which
everybody is.
Speaker 2 (35:01):
I don't think anybody.
Speaker 3 (35:02):
I don't think most people thought that Terifridge were going
to come down to thirty percent on China. But if
you are second guessing your moves when it comes to
your portfolio, please give the folks at Armstrong Advisory Group
call it eight hundred three nine three for zero zero one.
Let us provide a little bit of context to how
we manage money here at Armstrong, how we manage clients
expectations as well as their overall financial plan. That number
(35:25):
once again for the Armstrong Advisory Group, eight hundred three
nine three for zero zero one.
Speaker 1 (35:30):
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Speaker 2 (35:46):
H let's see, do we want to talk about Apple? Sure?
Tim Cook's got to be pretty happy today, especially because
in the Wall Street Journal with an exclusive, Apple is
weighing price increases for its fall iPhone lineup, uh, but
not blaming tariffs for doing So.
Speaker 3 (36:04):
Okay, okay, interesting mix that you're gonna have to you know,
thread the needle there on, Timmy, But how are you
gonna do it?
Speaker 2 (36:13):
Well, here's the thing, Like, this is what it comes
back to. Companies either have to eat these tariffs or
they got to pass on price increases or some combination
of both.
Speaker 3 (36:26):
Well, and furthermore, I don't think that Apple is now
subject to thirty percent tariffs.
Speaker 2 (36:30):
So they're not on the smartphones, but there are still
things that they have to import, Like there still is
stuff that they have to bring in from child Like
you know, if they're making stuff somewhere else, they might
still have to bring in you know, rare earth's from
China to make you know, ye this and whatever it
might be. So and and look, moving production to India
is not free You can't just yep. You don't just
(36:52):
say hey, let me take this production over here and
move it over here like you're you're not playing a
video game. There's actual costs of doing so.
Speaker 3 (37:02):
That said, I can't think of anyone outside the administration
that I would guess has a better.
Speaker 2 (37:10):
Direct line and.
Speaker 3 (37:13):
Educated guests on where terraffs will land for a number
of different countries than Tim Cook at Apple right now. No,
he's a number one connected person outside of those working
in the White House.
Speaker 2 (37:26):
He might even be more connected than people working in
the White House, many of them. Yeah, quite possibly. Tim Cook.
We talked about you know, remember Tim Cook was Apple
COO for what maybe ten fifteen years before he took
over for Steve Jobs after he passed. Yeah, when we
talk about logistics and specifically like the logistics and operations
(37:49):
of running a major tech manufacturer, boils down to one thing.
How close of a relationship do you have with the
Chinese government. I'm not saying that's good or bad. I'm
just saying that it's what it is. And the amount
of sway that someone like Tim Cook has and the
amount of information he gathers is second to none. In
(38:10):
my opinion. Let's take a quick break here. We got
our two coming up in just a little bit.
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(00:20):
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(01:06):
and Mike Armstrong.
Speaker 2 (01:10):
Monday, Monday Monday here on the Financial Exchange, Chuck, Mike
and talker with you, and we've got a pretty darn
significant rally taking place across all major US equity markets
on the back of the announcement earlier this morning by
I think it was Scott Besst and his counterpart with
(01:31):
China who originally had it during the nine am Geneva
Time press conference that they put out that terrorfrates between
the US and China are coming down significantly effective immediately.
Big thing that we're seeing each side stepping their terifrate
down by one hundred and fifteen percent, which I know
(01:51):
sounds like it's above the theoretical maximum, but it's the
percentage charged on goods that they're coming down by. So
the US reduced its terrorfrate on imports from China from
one hundred and forty five percent, which was a de
facto embargo, down to thirty percent. China in turn reduced
its tariff rate from one hundred and twenty five percent
(02:12):
down to ten percent, with both sides agreeing to a
ninety day pause and further talks before taking any additional action.
Speaker 3 (02:20):
So I think some context is helpful for how investors
and analysts were thinking about these talks going into this weekend.
On Friday, we talked a little bit about it. The
I would say kind of forecast out there ranged anywhere
from hey, these could land in the fifty to eighty
percent range when these talks are over, if there's some
(02:41):
negotiation done, And the conversation we were having was, well,
what it fits extreme to the other directions, Well.
Speaker 2 (02:48):
We talked about this. We said, look that you have to,
you know, consider possibilities outside of what the market is
pricing in. On the downside, it was, hey, what happens
if they storm out of the room and there's no
progress and we still hundred and forty five percent? And
on the upside, I think we said, look, the best
case scenario is probably getting to twenty percent, which was
where they were before April tewcond So when you say,
(03:11):
look we ended up at thirty percent, it's pretty darn
close to the best case scenario that we were discussing.
We said, look, we're not sure that this is particularly likely,
but you have to consider that this could happen. And
sure enough, that's that's what you ended up seeing here.
So I think when we talk about this, I'm less
concerned with like what actually went on during the negotiations,
(03:34):
just because I don't think it's particularly relevant or useful.
I also don't think we'll ever know, So no, you know,
expeculating on like, oh, like how did this? Who cares?
I think the important thing is, look, what is the
actual impact to the US economy at this point and
where do things go from here? And I gotta tell
you there's there's a lot of meat that we can
(03:56):
discuss in here. So first be obviously, you go from
one hundred and forty five percent, where companies are like, no,
we can't ship anything like that's that's kind of ludicrous
for us to even consider doing this. Uh So you
go from there down to a thirty percent teriff rate,
which from talking with people who again are you know,
(04:20):
importers of stuff from China, they say, yeah, it's not
gonna be as comfortable as you know where things were before,
you know, zero and then up to ten and then
up to twenty percent. But okay, I can figure out
how to run a business with tariffs at thirty percent,
even if my margins are impacted.
Speaker 3 (04:37):
Yeah, let's give this an example here, because again, I
think these get framed incorrectly in terms of how they
actually work. Very infrequently are we actually individually you and
I buying products from China to be shipped directly from
there to US. Usually it was through an intermediary who's
buying supplies to either finish manufacturing in the United States
or you know, build a finished product in China that
(04:59):
they doc on shelves here in the US. So you've
talked about a lot your friend with the board game company,
and I'm just gonna assume that his board games cost
fifty bucks and twenty one twenty one dollars.
Speaker 2 (05:10):
To make board games to make twenty one dollars to make.
So yeah, I fifty people.
Speaker 3 (05:17):
So I guess because because I mean, you know, we're
not talking about Monopoly. We're talking about like board games
and games that you know, people are passionate about, and
they're small.
Speaker 2 (05:29):
Kind of niche games.
Speaker 3 (05:30):
So I'm assuming that retail for what like fifty six
So he is a higher end board game manufacturer. So
we're talking stuff that is low triple digits, got it?
Speaker 2 (05:41):
Okay? So sells for one hundred costs twenty to make,
let's call it. Yeah.
Speaker 3 (05:46):
So previously that teriff rate was bringing the cost to
manufacture in the fifty to sixty range.
Speaker 2 (05:52):
Yes. And and by the way, I like because I
have numbers from him on like you went around and
like shopped this around. He was like, look, if I
wanted to make in the United States, it'd be ninety
three dollars for me to make it in the US.
And that's before handling any of you know, the shipping,
the selling to like yadie, like there would there would
be no profit for me if I were to do
that likewise at twenty dollars, you know, and you take
(06:15):
that up to a sixty dollars production cost. Again, think
about most companies. Their margins are not eighty ninety percent.
Margins usually are somewhere in the five to fifteen percent
range for most companies that are selling goods. So in
his case was basically, look, I'm gonna go from making
you know, ten percent on these to losing twenty to
(06:37):
thirty percent on every item that I sell. Right with
a tear. If at thirty percent, it's still probably assuming
that he eats all of the cost, which he's not
going to still eats through probably somewhere in the ballpark
of sixty to seventy percent of his profit right when
it's all said and done, is profitably be reduced by
somewhere around twenty to thirty percent as a result of this.
Speaker 3 (06:59):
Yeah, and again, so you're if you're cost of manufacturer
twenty bucks, you're bringing that up to twenty seven dollars
once you include the tariff passing along seven dollars a
price increase to a you know, a game that costs
one hundred twenty bucks, let's call it. That's you know,
even if you're just passing along half of it, it's something,
but it is probably not detrimental to the buyer.
Speaker 2 (07:20):
So this is something where you look at this and
you say, okay, so these these importers of goods from
China are going to if there's still you know, alive.
Because again, there are some companies that didn't plan, you know,
or didn't have the wherewithal to be able to even stomach,
you know, a four to five week situation like this.
(07:40):
So you have some that might have gone out of business,
not I don't know how many. I don't know you
know exactly which ones, but the ones that are around
will say, okay, we're gonna spool our factories back up.
We're gonna get things loaded onto ships, and we're gonna
get you know, everything moving. Now you've got the additional
costs that you've got to pay because of the tariff.
That's part one, Part two. Remember a lot of people
(08:02):
paused factory production in China at the outset of this.
When you start those productions back up, A, probably not
gonna be back up to full speed right away. B.
You better believe that all of those you know, big
old container ships that you know used to be coming
from China have since been rerouted to Okay, there's more
(08:22):
imports coming from Vietnam and Thailand, so great. Now we
got to get these ships back to China so they
can bring this stuff. And there's a lot more coming
because companies are gonna want to front run tariffs. The
people that I've talked to are saying that freight rates
are expected to go up anywhere from fifty to one
hundred and fifty percent, depending on the route and exactly
how much demand comes through. So where you land with
(08:46):
this is yeah, you're still gonna see some sporadic disruptions
of different goods and things like that that probably roll
through the course of the summer and into the fall
and maybe even early winter. It's it's like anytime that
you have a situation like this, you're not going to
have anything right back to how it was. Any of
those catastrophic situations are taken off the table here. But
(09:09):
the stuff that's going to be coming back in now
has a bunch of additional costs that's attached to it.
So the way that you deal with that is either
you eat it yourself, you pass it on to consumers,
probably some combination in both cases. What does that do
to corporate margins? And then what does it do to inflation?
And how do those things impact the US economy? You know,
(09:29):
those are kind of the next thing that we worry
about now. It's not because this is like all dooming goom,
but these are real things that we're going to be
seeing and having to deal with right now. They're real
costs that are being born either by companies or buy
and buyers of their goods.
Speaker 3 (09:45):
So as happened on April ninth, which was the rollback
of what was April second, again it was liberation Liberation Day,
is there a rollback of Liberation Day or at least
a significant portion of it. This seems to be a
rollback of one of the worst case scenarios for US
(10:05):
China trade, as well as trade for some other countries.
And that's kind of where I want to dig.
Speaker 2 (10:11):
In a little bit.
Speaker 3 (10:12):
Is we seem to have we now have set a
ninety day tariff rate for the United States in China.
I want to talk a little bit about that context
and what it might mean for trade and developments with
other countries whom we are going to negotiate over the
course of the next ninety days. Because China is unlikely
to be the last announcement on this front, so quick
break and tackle that next.
Speaker 2 (10:33):
Here on the Financial Exchange.
Speaker 1 (10:35):
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Speaker 2 (11:29):
Mike, when we talk about the step down in terrace
between the US and China that was announced this morning,
you had some other kind of surrounding topics that you
wanted to touch on as well.
Speaker 3 (11:40):
Yeah, I guess I just wonder how this frames future
conversations that are had with other countries. I certainly think
in some of the easier to negotiate countries, even those
with a significant trade and balance with the United States,
it's tough for me to envision a scenario where the
rate of tariffs goes above thirty percent now for say
(12:03):
India or Vietnam or Japan. I mean, maybe I'm misreading
the situation, but if we've gotten to this thirty percent
level with China, it's difficult for me to envision a
scenario where country is other than like Iran or North
Korea that we don't trade with anyway, have teriff rates
that are substantially higher.
Speaker 2 (12:20):
Well, I think this is It's one where you could
probably see whatever happens with China as the ceiling. I
think the question is where is that ceiling? Like, is
there a compelling case that it's lower? Quite honestly, there is,
based on what Scott Beston said today, which is, hey,
like we're seeing, you know, some progress on fentanyl, and
obviously twenty percent of this thirty percent that's there is specifically,
(12:44):
but that the US is singled out because of fentanyl.
You could see a case where the US has you know,
the same teriff rate on China as the UK three
months from now, six months from now, or something along
those lines. I'm not saying that's right or wrong, or
that I agree with it. I'm just laying out the
pos because again, you have to consider the range of possibilities,
(13:04):
is all that I'm saying. On the other side of things,
the April second originally announced tariff rate would have taken
tariff's on China up to fifty four percent. Is that
still a possibility If things go badly. Sure, So I
think there's a range of kind of where that maximum is.
But this gets back to something that I said on
(13:28):
April third, immediately after, which is, look, this is not
the end of tariff uncertainty. No, it's the beginning. And
right now this is a continuation of that, simply because
I don't think there is any sense in my mind
that we have seen the final numbers for any country,
(13:48):
simply because I don't know that there are any final numbers, Mike,
I'm pretty close to comfortable that we've reached the final numbers.
With the UK, I'm not. I think they could go lower. Yeah,
I like, if you want, if you right now said hey,
for countries X, Y and Z, where do you think
these can go over the next year. I think the
(14:09):
UK can go lower. I think Vietnam can go lower.
I think Malaysia Thailand can go lower. I think the
EU could go higher. I think China could go either
higher or lower. Like there's a wide range, like you
go through country by country, and I don't think we
are at the final number anywhere, because I don't think
there is a final number. That's a constant negotiation. And
(14:31):
this gets to my I think where I've landed on this,
which is Hey, if that is the case, then until
you get to something that is not country by country
but instead sector by sector, I don't think you are
going to be seeing anything in terms of a meaningful
(14:53):
shift to producing.
Speaker 3 (14:54):
Stuff back in the US agreed there, which you're not
going to build a giant auto facility right.
Speaker 2 (14:59):
Now because you have no idea what tariffs. You're gonna
wait for more clarity. Yeah, there's no incentive to do
that here. And by the way, it's also been clear
that even in those key areas, those are even open
for negotiations. See what happened with the auto parts piece
of auto tariffs and how that was pushed back and
could be you know, delayed further. So in fact, in
(15:20):
the very short term, you're gonna see what might be
considered the exact opposite of manufacturing in the United States.
Because if you are Chuck's friend who makes board games,
or if you are any business at all right now,
you this morning at seven am sent a bunch of
notices to your Chinese suppliers saying, load up those boats
as fast as you possibly can. I want this stuff
(15:42):
in the country. I want more, you know, I want
triple my order. I'm borrowing money from the bank to
be able to triple my order or from whoever I
can in order to get this stuff into the United
States in the next ninety days. Pay the tariff that
I know is going to be thirty percent. And again,
why is that the opposite of manufacturing in the United States. Well,
because you are again not even considering moving that elsewhere.
(16:05):
You're not considering it moving it to India, Mexico, Vietnam.
Right now, you are purely saying, buy me the rest
of this year's supplies of this stuff, whatever I can
afford and whatever I think I can sell, and give
me a chance to think through what I want to
do next. Yeah, and get it all into the US.
So I think where I'm landing on this quite honestly,
(16:26):
in terms of again, I you listen to what people say,
and I think that's informative too, but it's I always
pay attention to what people do. The piece that is
apparent right now is that this is something that the
Trump administration wants to do as a revenue raiser. I
(16:46):
think that's pretty clear. And here's the thing, Mike. If
they don't, then let's ask kind of the big question
what is the point, because here's the thing, the tariffs
have not been in place long enough to do anything.
From a restoring perspective, Yeah, the step down in China
(17:06):
was bigger than people thought, which to me at least suggests, hey,
they don't want to target, they don't want some kind of,
you know, more direct confrontation with China. I'm not even
saying militarily, even economically, like you you could have easily
gone down to fifty percent or fifty four where you're
like wherever you wanted to there. The rest of the
reciprocal tariff rates are still paused for you know, another
(17:29):
sixty days at this point, and so if it's not
about raising revenue, what is it about.
Speaker 3 (17:37):
So I think that that might be the optimistic view
that hey, this is the goal, which is to raise
revenue to offset taxes, and I think that most certainly
from an investor perspective, that's one of the better.
Speaker 2 (17:49):
Case scenarios you can have out of all of this.
Speaker 3 (17:52):
I think, you know, ideally, from the stock market perspective,
you just want the free trade. But if the tariff
revenue as a goal to offset tax decreases is one
of the end goals here, then that looks pretty attractive
from a market perspective. The pessimistic viewpoint would be, there's
(18:13):
a vast difference of opinion within the White House as
to what the end goals are here, and they're just
reacting kind of weak to week to what markets tell them,
and that's that would be a concerning avenue if that
were what's going on here, And frankly, there's a little
bit of evidence of that. On April ninth, the evidence
was not that the Trump administration had a big change
(18:35):
of heart. The evidence was that bond investors forced them
to change their policy very rapidly. And the read that
I had was Okay, well did anyone think of this
ahead of time?
Speaker 2 (18:47):
And the answer is seemingly no. So I think this
is why again like trying to like pay attention to, hey,
what is in place and what does it say about
where they want to go? The piece that's still intact is, hey,
they want to raise some revenue. They've come out repeatedly saying, look,
the ten percent you know, global baseline tariff is going
to be in place and we're not changing that. That's
(19:07):
the baseline from which you have to negotiate on the
piece that I think is challenging. That is okay. Like
if if you view China and personally I do as
kind of the country with the worst trade offenses out there.
If thirty is the theoretical maximum, that's a pretty narrow
range that you're giving yourself on anything you know in
(19:28):
the future. Let's take a quick break. When we come back,
We've got Wall Street Watch after this.
Speaker 1 (19:40):
Like us on Facebook and follow us on Twitter. Act
TFE show. Breaking business news is always first right here
on the Financial Exchange Radio Network. Time now for Wall
Street Watch a complete look at what's moving markets so
far today right here on the Financial Exchange Radio Network.
Speaker 4 (20:00):
Are surging this morning after the US and China agree
to substantial tariff cuts for ninety days after constructive talks
in Switzerland over the weekend. Treasury Secretary Scott Besson also
said he expects to meet with Chinese officials again in
the coming weeks to get rolling on a more fulsome agreement.
At the moment, the Dow is up by over two percent,
(20:21):
or eight hundred and eighty nine points, SMP five hundred
up two point three percent or one hundred and thirty
four points. And the NASDAC now up three point two
percent or five hundred and seventy four points. Russell two
thousands up three point four percent, ten year Treasure reeled
up by six basis points, now at four point four
to three percent, and crude oil is up three percent today,
(20:44):
trading just below sixty three dollars a barrel. Big tech
sector rallying today on the heels of this tariff news. Amazon,
which sells many Chinese made products, up by seven percent,
Tesla up by five percent, in chip maker and video
up by over three percent. Apple also seeing gains today,
up over five percent. Separately, the Wall Street Journal is
(21:05):
reporting that the iPhone maker is weighing price increases for
its fall lineup, a step it is seeking to couple
with new features in design changes. The report adds that
Apple is determined to avoid any scenario in which it
appears to attribute price increases to tariffs on goods from China,
where most devices are assembled. Meanwhile, retailers also seeing big
(21:26):
gains on the heels of the tariff news. Restoration hardware
up seventeen percent, Best Buy up seven percent higher, five
Below up nineteen percent, and Home Depot trading three percent higher.
Speaker 2 (21:39):
Elsewhere.
Speaker 4 (21:39):
Several drug makers seeing attention today after President Trump yesterday
said he will sign an executive order today that would
reduce prescription drug costs almost immediately by thirty to eighty
percent to match prices paid by several other countries. ELI
Lilly and Johnson Johnson down by about a quarter percent,
while Pfizer is actually up by two per in. Shares
(22:01):
of Kindly MD rocketing over four hundred and fifty percent
after the healthcare company announced a merger with Nakamoto Holdings,
a bitcoin investment company founded by David Bailey, a key
cryptocurrency advisor to President Trump. Tucker Silvan, that's Wallstreet.
Speaker 2 (22:17):
Watch anything else we want to talk about as it
relates to the US China step down in tariffs.
Speaker 3 (22:26):
It's going to make its way into the theme of
the show all day today. So but now I don't
think I have any other major takeaways. There's gonna be
a rush to goods from China. Uh, there's going to
be really busy ports, really big busy container ships all
coming into the US at the same time. It'd be interesting, Actually,
I bet we were probably going to see some of
(22:46):
what we saw during COVID. Remember when there were all
those ships hanging out in the ports of Seattle and
la and all those places waiting to get unloaded. We're
probably going to see that how long does it take
for those ships to move?
Speaker 2 (23:00):
So? Well, here's the thing. So remember a lot of
these factories in China have been shut down to this point.
You gotta spoo them back up, which probably takes a
week or two.
Speaker 3 (23:10):
But there are some ships that are there are some
containers that were ready to leave port.
Speaker 2 (23:14):
There might not be ships there though. That's the thing,
Like the ships are. The ships are sitting there saying
if if you are Maresk, who is you know, one
of the five companies that basically carries like ninety percent
of all goods around the world. You're sitting there and
you're like, Okay, I got this boat that carries two
thousand containers. Am I gonna have it sit in Shanghai
(23:36):
waiting for containers that may or may not be loaded. No,
I'm gonna send it to Thailand and pick up something,
you know in the interim. Now, the problem is the
interim becomes Okay, I sent the boat to Thailand, it
takes three days to get there. Then I got to
load it for a few days, then it goes over
to the US for twenty days, comes back twenty more.
So it's like it's fifty days before that boat gets
back to Shanghai. Yep. So like this this is the
(23:58):
problem that you end up with. And this is why
you kind of sit here and you look out at
you know what's coming, and you go, oh, my goodness,
there's going to be so much stuff that is coming
in if you are a because here's the thing, if
you are a company, right now, like there's two different
ways that you can look at this, by the way,
and I think we'll see like both of these in
(24:20):
different respects. On one hand, you go, I need to
get everything I can right now because who knows where
these will go. On the other, you sit there and
you go, you know what, I waited thirty days and
they lowered the teriff weight from one hundred and forty
five to thirty. Maybe I'll wait at the ninety and
it'll go down to ten. It's a risk. I'm not
saying it isn't. Yeah, but like you can see the
(24:42):
thinking on it. You can.
Speaker 3 (24:45):
Has there been any announcement on those who paid the
one forty five no refunding interesting.
Speaker 2 (24:52):
Now, there weren't that many because it was basically like
the last week or so that you add, you know,
a smattering of ships that were coming through that way,
So there weren't that many. But in any case, like
you're just gonna see a ton of demand for transportation
services for anything related to stuff coming from China. Now
(25:12):
here's the other thing again, just kind of like thinking
through this. Let's say that I'm Vietnam. I know that
I can't be a country, but let's say that I
am a senior government official from Vietnam, because I don't
know how my my mountains would feel, you know, because
of this. But what I do know is, hey, if
I'm Vietnam and I see, okay, so you had one
weekend of talks with China and you reduce their tariff
(25:35):
rate by effectively like eighty percent, you know, from almost
one hundred and fifty down to thirty. I'm sitting here
and I go, what are you gonna do for me?
I'm sitting here at ten right now as Vietnam you
told me I was gonna be it. I forget what
the Vietnamese tariff rate was. I believe it was like
North It was really seven, or it was somewhere around
(25:56):
like forty five or fifty. And I sit there and
I go, Okay, So, like, what can I negotiate? Where
are you? You've got Lutnik saying the lowest I can
get to is ten, which is where I am. I
was at, like forty and change or fifty and change
somewhere in there. What am I trying to negotiate here?
Speaker 3 (26:17):
Right, especially in the context of one of the theories of
how you could negotiate good trade deals with the likes
of Vietnam, would be hey, make you know, make them choose, right,
who do you want to be a partner with US
or China? This new deal that you've announced is not
going to be paired.
Speaker 2 (26:32):
Why do I have to choose?
Speaker 3 (26:33):
Yeah, this is not going to be paired with a
bunch of tough negotiations with Japan, Vietnam, Malaysia saying hey,
either stop routing orders, stop doing all the stuff you're
doing to support China, or you're going to face massive tariffs.
Like no, we are working towards reconciliation with China as
part of this deal. So therefore, I don't think that
any of those are going to be faced with some
(26:55):
tough stance on China.
Speaker 2 (26:57):
So I think that that becomes something that's complicated. But
the piece that I think is interesting on this piece
in the the in the Bloomberg, that's what they call it.
US retailers are focing post tariff spending disorder. Okay, let
me let me think about like what that is. And
the subheadline is where you know, they kind of start
to get into it. The trade agreement between the US
(27:18):
and China is good news, but American consumers are likely
to remain hesitant.
Speaker 3 (27:22):
So can we talk about what we think we saw
when it came to hesitant consumers because I can only
point to like maybe three areas of hesitation on the
part of consumer.
Speaker 2 (27:32):
Yeah. The places that we sawt were in travel related stuff.
Speaker 3 (27:35):
So hotels and airlines yep. And fast food restaurants.
Speaker 2 (27:40):
Yes, those are two things.
Speaker 1 (27:41):
Was their third?
Speaker 2 (27:42):
Oh, hotels, airlines and fast food go. Yeah. Those other
than that like auto sales good up, No meaningful shift
and trend for things like electronics or home improvement supplies
or stuff like that. Nicer restaurants fine, some of them.
Others like you got into like that mid range and
like Chipotle and the those guys were struggling. Sure, you
know Starbucks was struggling, but they've been struggling, so like,
(28:04):
who knows if it's anything unique to this Starbucks tariffs? Yeah,
problem So I mean exactly, Starbucks has been in a
black hole, suck for like five years now, so I
don't think you can really tie anything to it.
Speaker 3 (28:16):
So I severely doubt that tariffs led to people consuming
less fast food. Correct, There's just no there's no line
that you can draw between the two. What you can say,
and this is you know reasonable, Hey, the lower end consumer,
it's completely tapped out. But that's not that's not a
teriff related thing, right. Could you make an argument that
(28:40):
tariffs and the market reaction to them was affecting travel
on airlines, hotels, airbnbs, and verbos? I would argue yeses.
I think, especially when you talk about foreign travel into
the United States, when you're looking at bookings of airbnbs
and verbos from Canadian citizens, for example, that's pretty clearly
signaled the downturn, and I don't think this is going
(29:02):
to reverse that. But on the other hand.
Speaker 2 (29:06):
The stories about Canadians boycotting US goods was before all.
Speaker 3 (29:09):
Yes, Chinese visitors to the US are not a massive
tourism block that we are. That we are usually concerned
about the other stuff that we were seeing on that end.
I just don't know that this is what reverses it.
I mean, certainly, I think if you are a business
owner who is pulling back on corporate travel, maybe you
(29:31):
greenlight it now after this these announcements. But Europeans aren't
going to be suddenly more excited to come back to
the United States. I don't know where this ultimately drives
any of those items.
Speaker 2 (29:43):
I think this gets me to kind of where I
am with the economic data the next few months right now.
Have no idea what the heck we're going to see.
Like the first again, the sub headline here the trade
agreement between the US and China's good news, but American
consumers likely to remain hesitant. Even if they were hesitant,
I don't know they would remain hesitant. I don't know
(30:04):
that that's even a fact that you have an evidence.
Speaker 3 (30:06):
I think you'll start to see fewer pulled guidance why.
I think basically that company, So here's what will happen.
Speaker 2 (30:15):
Can you have fewer pulled guidances when we have two
sets of ninety day windows that we have to get through.
Speaker 3 (30:20):
Because I think you'll basically give guidance saying, well, if
we assume the tariffs stay where they are now, then
this is our guidance. The guidance might not be terribly useful,
but it'll be better than companies saying we don't have
any guidance.
Speaker 2 (30:33):
Maybe. I mean, why, here's the thing. If you've already
pulled it, you're gonna put it back in. What's what's
the upside to you? Like, if if you've already pulled
your guidance, what's the upside now to putting it back in?
There is none? Like the only thing that can happen
if you're right. Okay, great, you're right anyways, and your
(30:53):
stock will you know, do what it does if you're wrong,
Why would people trust your guidance? Again? Yeah, So I
don't know. I kind of look at it, and again
I just view the next few months. We're gonna have
data that's all over the place. You're gonna have some
things that are showing massive spikes and activity. You're gonna
have some things again, people loaded up on cars before
(31:15):
all these tariffs. By the way, the twenty five percent
imported auto tariffs still in effect yep, so like and
those are stacked by the way. So here's the funny thing.
You buy a car, like you buy a volks you
buy a BMW right now that's not made in the US,
which are like most of their sedans because they it's
not like economically feasible to do that. Here, you buy
(31:37):
a BMW five series right now, you're paying a higher
tariff rate than you are in a sweatshirt from China. Likewise,
you buy a land Rover or Jaguar from the UK.
Speaker 3 (31:47):
You're facing a lower tariff than if you import, if
you buy a Ford from Canada.
Speaker 2 (31:53):
So like, there's there's all kinds of weird stuff right now.
And this is why I say, like the data is
gonna be all kinds of weird. You're gonna have some
things that look like they're going through the roof for
the next couple of months, and things like auto sales
that have been pulled over, pulled forward like what happened.
Would anyone be surprised if auto sales decline it like
a five or six percent seasonally adjusted rate. No, because
(32:15):
they're just reversing what they did the last couple months.
Market's last peaked in February. Let's take a quick break.
Speaker 3 (32:20):
I want to talk about some contexts in terms of
where markets are right now, because big daily swing. Obviously
on the China US Trade News. We'll cover markets next
here on the Financial Exchange.
Speaker 1 (32:30):
The global trade war is in full swing. How long
will it last? Is anyone's gas? Keep it here for
the most up to date information plus breaking news every
day right here on the Financial Exchange Radio Network. Find
daily interviews and full shows of the Financial Exchange on
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up on anything and everything you might have missed. This
(32:53):
is the Financial Exchange Radio Network.
Speaker 4 (33:03):
This segment of the Financial Exchange is brought to you
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That's visit USBI dot com. Chuck.
Speaker 3 (33:31):
We were talking a little bit before about just markets
and contextualizing where we have gone so far this year.
So S and P five hundred is basically now flat
for the year. We started January two at fifty eight seven.
Speaker 2 (33:44):
Flat for the year.
Speaker 3 (33:45):
It's flat since the election. Flat since the election. Now
we are in the election. The gap between the day
of the election in the day after the high for
markets was reached February nineteenth, were a couple percentage points
off of that all time high. A couple We're about
five okay, yeah, so five percentage points off of that
all time high reached in mid February. And there's a
(34:09):
number of different ways to read that. I tend to
think that the recession risk is still higher than it
was on election day markets again taking an optimistic viewpoint
here of where tariffs go, where tax rates go, presumably,
and a whole slew of number of different things. But
for some context, that's where things have gone. Obviously, at
(34:30):
their worst, we were off about twenty percent on the
market downturn on the S and P five hundred, and
so what worries me is the same thing that I've
been talking about for a while, which is the average
retail investor with this type of whiplash historically has gotten
pretty badly hurt because they tend to react a lot faster.
They tend to selwyn news is bad, buy win news
(34:53):
is good. And if you're finding yourself, I guess in
that position of second guessing your own moves today, which
everybody is.
Speaker 2 (35:01):
I don't think anybody.
Speaker 3 (35:02):
I don't think most people thought that Terifridge were going
to come down to thirty percent on China. But if
you are second guessing your moves when it comes to
your portfolio, please give the folks at Armstrong Advisory Group
call it eight hundred three nine three for zero zero one.
Let us provide a little bit of context to how
we manage money here at Armstrong, how we manage clients
expectations as well as their overall financial plan. That number
(35:25):
once again for the Armstrong Advisory Group, eight hundred three
nine three for zero zero one.
Speaker 1 (35:30):
The proceeding was paid for by Armstrong Advisory Group, a
registered investment advisor. Nothing in the ad or in any
Armstrong guide a specific financial, legal or tax advice. Consult
your own financial, tax, and estate planning advisors before making
any investment decisions. Armstrong may contact you to offer investment
advisory services.
Speaker 2 (35:46):
H let's see, do we want to talk about Apple? Sure?
Tim Cook's got to be pretty happy today, especially because
in the Wall Street Journal with an exclusive, Apple is
weighing price increases for its fall iPhone lineup, uh, but
not blaming tariffs for doing So.
Speaker 3 (36:04):
Okay, okay, interesting mix that you're gonna have to you know,
thread the needle there on, Timmy, But how are you
gonna do it?
Speaker 2 (36:13):
Well, here's the thing, Like, this is what it comes
back to. Companies either have to eat these tariffs or
they got to pass on price increases or some combination
of both.
Speaker 3 (36:26):
Well, and furthermore, I don't think that Apple is now
subject to thirty percent tariffs.
Speaker 2 (36:30):
So they're not on the smartphones, but there are still
things that they have to import, Like there still is
stuff that they have to bring in from child Like
you know, if they're making stuff somewhere else, they might
still have to bring in you know, rare earth's from
China to make you know, ye this and whatever it
might be. So and and look, moving production to India
is not free You can't just yep. You don't just
(36:52):
say hey, let me take this production over here and
move it over here like you're you're not playing a
video game. There's actual costs of doing so.
Speaker 3 (37:02):
That said, I can't think of anyone outside the administration
that I would guess has a better.
Speaker 2 (37:10):
Direct line and.
Speaker 3 (37:13):
Educated guests on where terraffs will land for a number
of different countries than Tim Cook at Apple right now. No,
he's a number one connected person outside of those working
in the White House.
Speaker 2 (37:26):
He might even be more connected than people working in
the White House, many of them. Yeah, quite possibly. Tim Cook.
We talked about you know, remember Tim Cook was Apple
COO for what maybe ten fifteen years before he took
over for Steve Jobs after he passed. Yeah, when we
talk about logistics and specifically like the logistics and operations
(37:49):
of running a major tech manufacturer, boils down to one thing.
How close of a relationship do you have with the
Chinese government. I'm not saying that's good or bad. I'm
just saying that it's what it is. And the amount
of sway that someone like Tim Cook has and the
amount of information he gathers is second to none. In
(38:10):
my opinion. Let's take a quick break here. We got
our two coming up in just a little bit.
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