The tripod's deeply connected with manufacturing, and we have to keep that in mind when President Trump makes it clear to business leaders there's to be no more plant closings to build overseas and ship back here.
He's saying: "look, your gross margins won't be hurt by building here, because you are going to get big tax breaks for doing so."
The questions are:
- Will Congress buy into these tax breaks, given the fiscal conservatives among the Republicans?
- Will costs go higher if you build here vs. there? Given, for example, the huge break companies get if they make things in pesos and then send them up here, is there going to be a cost increase for automobiles, say, that would normally have lowers sticker prices because they were built in Mexico.
And is this whole thing fair for the companies that are natural winners? For example, Comcast (CMCSA) , an Action Alerts PLUS name which my colleague David Faber talked about as a total winner under this regime by nature of its domestic base, where its only exposure to overseas is that it exports movies.
That's a total win.
Now, if we step back, I think then market's falling simply because the president's tone is purely protectionist. Why would a European authority allow a deal to proceed -- let's say Dow (DOW) and DuPont (DD) -- if there can be no concessions that allow plants to be built there that Trump thinks should be built here?
Or, on another, broader point, how about simple retaliation: no deals, because the president is so set on "winning" on all trade confrontations.
When you have that level of uncertainty, you do not have a situation conducive to buying stocks.
So the market comes down.
I come back to saying: "what's really new here?" It's the president putting the candidate hat on again. It doesn't stay off for long.
Everything's a negotiation, though. And if you play ball, like Marilyn Hewson, the CEO of Lockheed Martin (LMT) has, then you get praised. Will her decision to try to cut costs out of the joint strike fighter?
We'll find out tomorrow when it reports.