Ford’s CFO Sherry House highlighted the current state of play with President Trump’s Tariff War when she reported the company’s results earlier this month:
“Given material tariff-related near-term risks and the potential range of outcomes, we are suspending guidance for full year 2025. These near-term risks include, among other things:
“Industry wide supply chain disruption impacting production; future or increased tariffs in the U.S.; changes in the implementation of tariffs, including tariff offsets; retaliatory tariffs and other restrictions by other governments and the potential related market impacts; and finally, policy uncertainties associated with tax and emissions policy.”
In the past, one might have expected stock markets to take fright at such a statement from a major US company. But effectively, the market shrugged its shoulders and moved on.
LAST WEEK’S ON/OFF NEWS RE THE TARIFFS BECAME JUST A TRADING ‘MOMENT’
Equally remarkable was the market’s reaction to the US court decision to rule most of President Trump’s Tariff War illegal:
“The Constitution assigns Congress the exclusive powers to “lay and collect Taxes, Duties, Imposts and Excises,” and to “regulate Commerce with foreign Nations.” U.S. Const. art. I, § 8, cls. 1, 3. The question in the two cases before the court is whether the International Emergency Economic Powers Act of 1977 (“IEEPA”) delegates these powers to the President in the form of authority to impose unlimited tariffs on goods from nearly every country in the world. The court does not read IEEPA to confer such unbounded authority and sets aside the challenged tariffs imposed thereunder.”
We’ve written here before about this issue of Fast Track Authority. The US Constitution makes it clear that the President has to take direction from Congress on trade issues.
And so he needs Fast Track Authority to negotiate with the outside world. Otherwise a State like Kentucky would never let him discuss Bourbon duties, or Maine let him discuss lobsters.
It has to be a joint decision on behalf of all 50 States.
So, one would have expected the market to react to the news. But as the chart of Thursday’s trading shows, markets hardly noticed.
THE STOCK MARKET IS FOCUSED ON GAMBLING IN CRYPTO MARKETS
A lot of strange things happened during the pandemic, as we all know. One of the strangest was that people couldn’t bet on sports teams, as sport was cancelled. So they bet on stocks instead for fun.
Today, however, the “fun” has developed into something a lot more serious. As Bloomberg’s Matt Levine has reported:
“The basic situation is that US public equity markets will pay about $2 for $1 worth of Bitcoin. I don’t know why this is, and I am not especially happy about it, but it’s true. If you have one Bitcoin, you can sell it on a crypto exchange for about $93,000, or you can sell it on a US stock exchange for about $186,000. Therefore, you should sell Bitcoins on the stock exchange, so people do.
“The most famous example is MicroStrategy Inc. (now just Strategy), which has built a perpetual motion machine out of buying $1 worth of Bitcoin, seeing its stock go up by $2, and selling more stock to buy more Bitcoin. Because this keeps working, people keep copying it.”
And now the President himself is joining in. As Reuters reports:
” Trump Media and Technology Group (DJT.O) will raise about $2.5 bn to invest in bitcoin, U.S. President Donald Trump’s social media company said on Tuesday, as it looks to diversify its revenue.”
THE TARIFF WAR IS A MAJOR RISK FOR THE GLOBAL ECONOMY
Meanwhile, the Tariff War is impacting the whole global economy, as Bloomberg’s chart highlights.
Ford is not the only major company that doesn’t know what will happen next.
And if the President loses on his current strategy, he will simply try another. As Goldman Sachs notes, he may start to add new Section 301/232 tariffs.
So the Tariff War will continue in one form or another.
WE ARE RISKING A REPEAT OF THE 1930s DEPRESSION
Roman Emperors used to distract people with “bread and circuses”. Today, it seems Bitcoin is playing this role.
The Tariff War is at major risk of repeating 1930’s Smoot Hawley Tariff Act which introduced tariffs to “protect” the economy – and led directly to the Great Depression.