#321 Tariffs and the American Economy

Industrial & Producing Consumer Products

With everything you read and watch in the popular press dealing with tariffs and trade, we believe that there are two large categories associated with these. The first is industrial and producing consumer products. That includes the making of clothes, furniture and other items. This is more of a traditional industry and usually protects older line industries. Most economic models show that over the long run you tend to not get much from this area. When you try and prop up a more mature industry like this you tend to see three things happen. These include disrupting a lot of the supply chain, bringing up a lot of manufacturing capability and the type of effort that goes into the products and raw material. It usually cost the tax payer a lot more to keep this propped up and in turn factors into pricing. If you look trade barriers and tariffs in this category, it’s not near as impacting as the second category.

High Technology / Intellectual Property

The second large category consist of high technology or intellectual property. Our argument is that the second category could be helpful. Anytime you are doing business with another country, if you are transferring technology, you are transferring a unique ecosystem within it. Meaning if you send technology out, it’s extremely difficult to get it back. For example, if you give a patent or trademark on a drug, you aren’t building the trade or tariff around one product but rather a whole ecosystem of products and that is very difficult to repatriate. A number of years ago some call centers transferred over to India. All it would take for those to come back is the dropping dollar and making it cheaper again. However, if you have complex technology it makes it more difficult to do so. We believe this is the category that is the most important to protect.

 

Ashley Page, JD, MBA
Senior Vice President
Wealth Consultant
Email Ashley Page here

 

Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

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