Well, lets think about "what's different" about this time.
Global supply chains are under attack. This particularly hurts tech hardware and component firms. How does it resolve? The fastest easiest way to get a resolution is the US gets some concessions out of a few trading partners, declares victory, and stops the war on the supply chains. How likely is that? Who knows? And if the US government decides to just keep tariffs on everyone ongoing for some period of time, well, the logical response of the rest of the world is to try to avoid the US in business transactions. Build in China/Asia, sell anywhere other than the USA.
No company is going to spend to build massive assembly plants in the US where labor is 10x the cost of Asia, and the tariffs may vanish in a week/month/year, and the rest of the supply chain isn't in the USA anyways. They'll just pay the tariff, US prices will go up accordingly, and they'll wait. If the US raises tariffs more and more, they'll reduce the scale of their overseas manufacturing footprint, but they aren't building money losing assembly factories in the unionized USA because the factory doesn't want to make "good jobs", the factory wants low paying hyper efficient hard working folks with no other options than the factory - these folks don't exist in the USA in any sizeable numbers.
What is perhaps different though is that peak multiples for affected stocks are going to - from here out - be lower than they were previously. Even unquenchable demand (NVDA) does not guarantee future profits if the US government is going to quickly blow up the sales channel for no apparent good reason. Should any tech stock trade at 25x forward EPS if the future sales might be cancelled on a moments' notice? Nope.
Hmmmm, lets see. Not sure how we just get back to "business as usual", but we probably will. Unfortunately getting there requires Trump to say "Oops, that didn't work". Good luck getting that. |
