Nov 29, 2018

For Continued U.S. Prosperity, Freedom Partners Urges End to Tariffs

Post by Freedom Partners

Arlington, VA – As President Trump is set to meet with Chinese President Xi at the G-20, an escalation in the trade war remains the biggest threat to derail America’s thriving economy, as evidenced by America’s top companies and a survey of chief financial officers (CFOs).

Nearly 75 percent of CFOs predict U.S. trade policies will have a negative impact on their business in the next six months, according to a CNBC survey, and none anticipated any benefit from them.

Freedom Partners Executive Vice President Nathan Nascimento issued the following statement:

“It’s past time for the Trump administration to work directly with China and other nations to break down tariffs and other trade barriers to keep America’s economy growing. There are legitimate concerns about trade with China, but taxing ourselves with tariffs only creates more problems.

“We urge President Trump to seize the moment at the G-20 and come to an agreement that helps U.S. consumers, producers, farmers, and workers. The alternative, to stay the course and impose dramatically higher tariffs in 2019, is too risky and jeopardizes our prosperity and robust job creation. Moreover, we need to go further and eliminate all unjust protectionist barriers.”

CFOs INCREASINGLY WARN AGAINST TRUMP TRADE WAR

CNBC Global CFO Council Q4 Survey Highlights

During CNBC’s Global CFO Council Fourth-Quarter Survey, More Than 35 Percent Of CFO Respondents Said U.S. Trade Policy Was The Biggest External Risk Factor Affecting Their Business. “U.S. trade policy has reemerged as the top concern from chief financial officers at some of the world’s largest companies. More than 35 percent of CFOs taking the fourth-quarter CNBC Global CFO Council survey say U.S. trade policy is the biggest external risk factor facing their business.” (David Spiegel, “US Trade War With China Won’t Be Ending Anytime Soon, And It Is A Big Concern: CNBC CFO Survey,” CNBC, 11/20/18)

  • This Is Up From The 10.4 Percent Reported During The Third Quarter, And 23.1 Percent Reported During The Second Quarter. (David Spiegel, “US Trade War With China Won’t Be Ending Anytime Soon, And It Is A Big Concern: CNBC CFO Survey,” CNBC, 11/20/18)

CNBC: Nearly 75 Percent (73 Percent) Of CFOs Said They Expect U.S. Trade Policy To Have A Negative Effect On Their Business Sometime Over The Next Six Months, While No CFO Said They Expected Positive Effects. “…and nearly 75 percent of respondents expect U.S. trade policy to have a negative impact on their business over the next six months. Not a single CFO surveyed expects a positive impact as a result of U.S. trade policy.” (David Spiegel, “US Trade War With China Won’t Be Ending Anytime Soon, And It Is A Big Concern: CNBC CFO Survey,” CNBC, 11/20/18)

The Survey Results Showed Heavier Concerns With CFOs At Asian And European Companies, With 44 Percent And 46 Percent Respectively Listing U.S. Trade Policy As The Largest External Risk Factor. “Throughout the survey, trade shows up as a nagging concern for CFOs, especially for members in Europe and Asia. More than 46 percent of European CFOs and over 44 percent of Asia CFOs say U.S. trade policy is the biggest external risk factor facing their business. Also in Europe, nearly two-thirds of CFOs there say the cost of raw materials will outpace rising costs of labor and capital over the next six months, likely a result of higher tariffs.” (David Spiegel, “US Trade War With China Won’t Be Ending Anytime Soon, And It Is A Big Concern: CNBC CFO Survey,” CNBC, 11/20/18)\

The CNBC Global Council Represents Large Private And Public Companies That Collectively Mange Nearly $5 Trillion In Market Value Across Multiple Industries. “The CNBC Global CFO Council represents some of the largest public and private companies in the world, collectively managing nearly $5 trillion in market value across a wide variety of sectors.” (David Spiegel, “US Trade War With China Won’t Be Ending Anytime Soon, And It Is A Big Concern: CNBC CFO Survey,” CNBC, 11/20/18)

Outlook On The Administration, Congress And The Economy

26.7 Percent Of CFOs Surveyed By CNBC Said That Trade Agreements Should Be Congress’ Number One Priority in 2019. (David Spiegel, “US Trade War With China Won’t Be Ending Anytime Soon, And It Is A Big Concern: CNBC CFO Survey,” CNBC, 11/20/18)

  • When It Comes To The Economy, 50.3 Percent Of CFOs Surveyed Said That They Disapprove Or Strongly Disapprove Of The Job Performance Of USTR Robert Lighthizer. (David Spiegel, “US Trade War With China Won’t Be Ending Anytime Soon, And It Is A Big Concern: CNBC CFO Survey,” CNBC, 11/20/18)

The Washington Post, October 2018: As A Part Of Its World Economic Outlook Report, The International Monetary Fund (IMF) Reduced Its Projected 2019 U.S. Growth Rate To 2.5 Percent Compared To 2.7 Percent In Its April Report, And “Repeatedly Singled Out Trump’s Trade Actions As Disruptive To Global Growth And Prosperity, Especially The Imposition Of Tariffs On Roughly Half Of The Goods That The United States Imports From China.” “The International Monetary Fund has cut its U.S. growth forecast for next year, warning that President Trump’s protectionist trade policies will harm growth domestically and around the world. In its World Economic Outlook, released Monday evening, the IMF says the U.S. economy is expected to grow 2.9 percent this year and 2.5 percent next year. The organization had forecast in April that the U.S. economy would grow 2.7 percent in 2019… The IMF repeatedly singled out Trump’s trade actions as disruptive to global growth and prosperity, especially the imposition of tariffs on roughly half of the goods that the United States imports from China. The IMF also reduced its growth forecast for China next year to 6.2 percent because of the trade war, down from 6.4 percent in April.” (Heather Long, “Trump’s Tariffs Will Harm Growth In 2019, IMF Predicts,” The Washington Post, 10/8/18)

  • IMF: Compared To The July And April Forecast, The IMF Reduced Its 2019 World Growth Rate From 3.9 Percent To 3.7 Percent In October, While Lowering Expectations For U.S. Economic Growth From 2.7 Percent To 2.5 Percent. (Table 1.1, “World Economic Outlook,” International Monetary Fund, 10/18)
  • IMF: “An Intensification Of Trade Tensions, And The Associated Rise In Policy Uncertainty, Could Dent Business And Financial Market Sentiment, Trigger Financial Market Volatility, And Slow Investment And Trade.” (“World Economic Outlook,” International Monetary Fund, 10/18)
  • IMF: “Higher Trade Barriers Would Disrupt Global Supply Chains And Slow The Spread Of New Technologies, Ultimately Lowering Global Productivity And Welfare. More Import Restrictions Would Also Make Tradable Consumer Goods Less Affordable, Harming Low-Income Households Disproportionately.” (“World Economic Outlook,” International Monetary Fund, 10/18)

August 2018: Reuters Poll Found Economists Think The U.S. Economy Will “Slow Steadily” In The Upcoming Quarters Due In Part To The Trump Administration’s Trade War. “U.S. economic growth will slow steadily in coming quarters after touching a four-year high in April-June, according to a Reuters poll of economists, who expect President Donald Trump’s trade war to inflict damage… Economists trimmed their growth projections across most quarters next year leaving the outlook broadly unchanged and vulnerable to the trade conflict with China.” (Hari Kishan, “U.S. Economy Expected To Slow, Damaged By Trade War: Reuters Poll,” Reuters, 8/22/18)

WSJ: “A Fair Guess Would Be Continuing Doldrums, As Global Growth Has Slowed And The Threat Of More Tariffs Hangs Over Supply Chains, Investment Decisions And Confidence.” “Trade flows revived along with growth in 2017, but they fell again this year as Donald Trump unveiled his global tariff assault after tax reform passed. The World Trade Organization hasn’t yet reported third quarter trade data, but a fair guess would be continuing doldrums, as global growth has slowed and the threat of more tariffs hangs over supply chains, investment decisions and confidence.” (Editorial, “The Trade Canary,” The Wall Street Journal, 11/20/18)

Major Companies On Tariff Effects

Solvay CFO Karim Hajjar: “I’m Not Seeing Anything In Our Bottom Line Today But Completely Concur With A Majority Of CFOs That We Only See Downsides On Cost, The Complexity On The Supply Chain, It’s Very Very Difficult. Businesses Need Predictability, We Don’t Like Uncertainty So Trade Wars And The Threats And Prospects Of Trade Wars Are A Big Negative For Us. It Will Impact How And When We Make Investment Decisions.” (“Solvay CFO: Threat Of Trade War A Big Negative For Us,” CNBC, 9/24/18)

3M (Consumer Goods) CFO Nick Gangestad: “If I Fast-Forward A Little Into 2019, We Think Tariffs Will Be Having A Negative Impact On Our Total Sourcing Cost… I’ll Talk More About This In On November 15, But Our View Is We Have An Approximately $100 Million Headwind From Tariffs.” (Bob Bryan, Trump’s Trade War With China Is Starting To Get Nasty For US Companies,” Business Insider, 10/25/18)

Harley Davidson CFO John Olin: “In Total, We Now Expect To Incur Approximately $43 Million To $48 Million Of Increased Costs Related To Tariffs During 2018.” (Bob Bryan, Trump’s Trade War With China Is Starting To Get Nasty For US Companies,” Business Insider, 10/25/18)

Ford CEO Jim Hackett: “From Ford’s Perspective, The Metals Tariffs Took About $1 Billion In Profit From Us, The Irony Of Which Is That We Source Most Of That In The US Anyway… If It Goes On Any Longer, It Will Do More Damage.” (Bob Bryan, Trump’s Trade War With China Is Starting To Get Nasty For US Companies,” Business Insider, 10/25/18)

Sleep Number CFO David Callen: “The Latest Tariff Rate Hikes Affect About 5% To 6% Of Our Overall [Cost Of Goods Sold]… We Are Working With Our Global Sourcing Providers To Mitigate The Potential For 40 Basis Points To 60 Basis Points Of Margin Rate Pressures Arising From This Fast-Changing Tariff Landscape.” (Bob Bryan, Trump’s Trade War With China Is Starting To Get Nasty For US Companies,” Business Insider, 10/25/18)

Polaris (Motorcycle, ATV, And Vehicle Manufacturer) CEO Scott Wine: “As I Mentioned Earlier, These Efforts Have Largely Been Effective So Far, Allowing Us To Hold Our 2018 Gross Tariff Impact To The Previous Communicated $40 Million… Through Recent Discussion And Analysis, We Now Believe It Is Unlikely There Will Be A Short- Or Medium-Term Agreement With China On Trade Issues, And With Substantial Impact Of The 301 List Looming, We Are Considering And Taking More Aggressive Action.” (Bob Bryan, Trump’s Trade War With China Is Starting To Get Nasty For US Companies,” Business Insider, 10/25/18)

Tesla, Business Insider: “Tesla Said On Wednesday In Its Third-Quarter Earnings Letter That It Expects Tariffs On Parts Made In China To Cost Around $50 Million During The Fourth Quarter Of This Year.”(Mark Matousek, “Tesla Said It Expects Tariffs On Chinese Parts To Cost Around $50 Million During Q4,” Business Insider, 10/24/18)

Stanley Black And Decker, Bloomberg: “The Toolmaker Will Raise Prices For Consumers And Work To Trim $250 Million In Operating Expenses For 2019, It Faced A $50 Million Increase In Quarterly Costs, Forcing It To Cut Its 2018 Earnings Forecast By 25 Cents At The Mid-Point.” (“Here’s How $260 Billion Of Tariffs Are Biting Third-Quarter Profit,” Bloomberg, 10/23/18)

Caterpillar: “Shares Tumbled After The Construction Equipment Maker Warned Of Rising Costs. Tariff Impact Was About $40 Million In Third Quarter; Full-Year Effect Is Seen At The Low-End Of The Range Of $100 Million To $200 Million.” (“Here’s How $260 Billion Of Tariffs Are Biting Third-Quarter Profit,” Bloomberg, 10/23/18)

Walmart: “In A Letter To The U.S. Trade Representative, Walmart Warns That The Duties To Be Imposed Sept. 24 In The U.S. And China Will Raise Prices For Consumers And Hurt Profit Margins For Retailers And Suppliers.” (“Here’s How $260 Billion Of Tariffs Are Biting Third-Quarter Profit,” Bloomberg, 10/23/18)

Vicor Corp. CFO James A. Simms: “Tariffs On Chinese Imports Are Becoming A Material Percentage Of Our Material Costs.” (Jim Puzzanghera, “‘It’s Total Chaos’: To Companies Caught In The U.S.-China Trade War, Tariffs Are Big Trouble,” Los Angeles Times, 10/26/18)

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