You can't have your protectionist cake and eat it, too. Or at least have it so everyone eats it.
This morning once again the president met with the Big Three auto manufacturers to urge them to build plants here. I totally get that. Plants may be automated, but a new plant generates a lot of jobs to build and a lot of jobs to service and they can ignite tired towns, the kinds of towns where lots of people who voted for Trump live.
They could be winners.
But against that, if the president is only going after the domestics then they are going to be disadvantaged vs. the foreign auto manufacturers who build in Mexico where there are no unions, a workforce that costs about 10 times less per hour than even the lowest wages in the U.S., with light pollution control laws, medical care paid for by the government, and best of all, a currency that's at 21 to the dollar. The peso was at 4 to the dollar when NAFTA was struck so that, more than anything else, will make the U.S. companies losers if they bother to build more plants here. To me there's too much capacity already so this is a sucker's game for all the auto manufacturers in the room. The next targets need to be BMW, Benz, Toyota and the like, which are spending billions in Mexico to take advantage of ridiculous differential, one made even bigger by Trump statements about Mexico, including his campaign pledge to build a wall.
At the same time can we recognize that when you put on tariffs, like former President Obama did on steel dumped here, then the earnings of U.S. steel makers can jump, witness the fabulous numbers this morning at AK Steel (AKS) but that the buyers of that steel will have to raise prices, causing their goods to be more expensive. Unless you shut down exports that are competitive or put a tariff on them then buyers of AK Steel's protected steel could be hurt competitively.
Now no one disputes that we need to hire more Americans. But the gains that come from free trade can't be disputed either: cheaper goods for all. Now if you don't have a job then you can't afford these goods. If you do, you are getting a break from globalization.
I am not picking sides here. I am saying that there's no free lunch in this business. I am a stock person, not an ideologue, and I can tell you that I simply can't recommend Ford (F) or General Motors (GM) , as cheap as they look, if they have to close plants in Canada and Mexico and bring back those jobs here or if they are the only ones -- and not their foreign competitors --who are stuck building plants in the high cost U.S. vs. the ridiculously low-cost Mexico.
Now, if our companies get the big tax breaks that Trump wants and can repatriate capital and have less regulation then you might want to own these stocks. But right now they are in a no-win situation that could severely impact the affordability of their cars vs. those foreign automakers that weren't around the table today. We want to buy American, but we also want American companies to be able to sell American, and I question how they can do so if they are playing with one hand tied behind their back at a time when only 43% of the cars in the U.S. are made in the U.S. because -- tax breaks and deregulation or not -- it's just so darned expensive to build here.