The trade war is destroying American profit

Posted Wednesday, 23 October 2019 ‐ CNN

New York (CNN Business)This is what a trade war looks like. An industrial giant in Illinois, a motorcycle icon in Wisconsin, a Minnesota snowmobile maker and the parent of Monopoly and Nerf all reported to investors this week that the trade war is biting.It's the earnings trend everyone saw coming. And warned about.What began as targeted tariffs on steel and aluminum imports in early 2018 accelerated over the past year and a half as tariff rates were jacked up with each disappointment in the negotiations. And now, months and months of those tariffs — and disrupted supply chains because of them — are raising costs and squeezing margins for a wide variety of companies.Think of it like this. A year ago, those tariffs were like a nasty cold. Irritating but temporary.Today, for multinational companies, the cold has become a chronic condition."President Trump's trade war is doing significant damage to the US and global economies," said Mark Zandi, chief economist at Moody's. "The higher tariffs act like a tax increase on businesses and their customers."If President Donald Trump follows through on his threat to raise tariffs again on Chinese imports in December, those tariffs would amount to a more-than $100 billion tax increase next year, Zandi calculated.Some executives are blaming higher costs from the tariffs directly. Others blame global uncertainty about how deep and how long the tariff regime will last.Industrial giant Caterpillar (CAT) reported a 6% revenue decline compared with last year. CEO Jim Umpleby predicted flat demand for the last quarter of this year. "We now expect end-user demand to be flat and dealers to make further inventory reductions due to global economic uncertainty," he said. Polaris (PII) makes snowmobiles, all-terrain vehicles and boats. Its management team has scrambled to offset the higher costs of tariffs through 60 different initiatives. The company has absorbed about $5 million of tariff-related costs this year by moving to source parts outside of China and negotiating with suppliers, among other things, CEO Scott Wine said on the company's most recent earnings call.Harley-Davidson's (HOG) tariff trouble was a $21.6 million hit to third-quarter earnings, up sharply from last year. Once hailed by President Donald Trump as the kind of American company his trade war was meant to protect, higher costs for steel and aluminum to make its bikes in the US has coincided with a demographic shift that favors big new markets in Asia, and fewer Americans buying Harleys. Harley-Davidson's CEO John Olin told investors, "We're looking at our business with an abundance of caution necessary in an environment like this." Harley wants to send some production to Thailand, to better capture the Asian and European markets.Some companies have seen disruption from tariffs that haven't even gone into effect yet.Hasbro (HAS), the maker of the board game Monopoly and Nerf toys, told investors Tuesday it may have to raise prices for games and toys, if a scheduled December 15 round of tariffs takes hold. Its CEO Brian Goldner: "If the December 15 tariffs were to take effect, we would take pricing to again protect our gross margin, and those price increases would be passed along to consumers." Of course, part of the strategy of the tariffs was to nudge companies to diversify their supply chains outside of China, and return production home. The president has said, if companies don't like tariffs, move back to the US. In some cases, that production is moving out of China, but to Vietnam and Thailand, among other places. Still, the president's trade advisers have said the overall economy is strong enough to absorb any disruptions from tariffs. They are looking for what insiders call a "course-correction" in the US-China trade relationship. Tariffs are the main tool for that. What CEOs would like clarity on is, how long will it last?

Other articles published by CNN

Posted Monday, 25 May 2020 ‐ CNN

(CNN)Rwanda has introduced robots as part of its fight against coronavirus.With 314 confirmed cases of the virus as of May 22, the East African country has enlisted the help of five anti-epidemic robots to battle the virus. The robots were donated by the ...

Posted Monday, 25 May 2020 ‐ CNN

(CNN)It was a mouth-watering prospect for sports-starved fans everywhere. Four of the greatest athletes the world has ever known, on the golf course at the same time, offering us a glimpse of who they are when they aren't winning Major Championships and...

Posted Monday, 25 May 2020 ‐ CNN

(CNN)A Texas community hit by terrible tragedy months ago came together over the weekend to celebrate a survivor's first birthday.Paul Gilbert Anchondo was two months old when his parents died shielding him from a shooter at an El Paso, Texas, Walmart on ...

Posted Monday, 25 May 2020 ‐ CNN

(CNN)Several members of the graduating class at The Lovett School in Atlanta, Georgia, have tested positive for Covid-19, according to a letter from the school."The school has been notified by several Class of 2020 families that their students have...

Posted Monday, 25 May 2020 ‐ CNN

(CNN)Just when you thought you'd learned how to spell Grimes and Elon Musk's unusual baby name, they've gone and changed it.Earlier this month, Tesla and SpaceX CEO Musk announced the birth of the baby boy in a post on Twitter, revealing his son was...

Posted Monday, 25 May 2020 ‐ CNN

In this weekly column "Cross Exam," Elie Honig, a CNN legal analyst and former federal and state prosecutor, gives his take on the latest legal news. Post your questions below. The views expressed in this commentary are his own. View more opinion on CNN. ...

Posted Monday, 25 May 2020 ‐ CNN

Rome (CNN)"The doctors were shocked. They said they had never seen anything like this," says Valentina Vigilante, recalling the terrifying day her 6-year-old son Nicolò was rushed into intensive care in Bergamo, northern Italy, as he struggled to...

Posted Monday, 25 May 2020 ‐ CNN

(CNN)Vanessa Bryant, wife of the late Kobe Bryant, shared a sweet moment this Memorial Day weekend -- a film of their baby daughter's first steps. In a video posted to Instagram, 11-month-old Capri stumbles across the room for the first time, into the...

Posted Monday, 25 May 2020 ‐ CNN

(CNN)With two barren peaks that rise only about 170 feet above sea level, the now extinct Pūhāhonu volcano in the Northwestern Hawaii Islands doesn't look like much. This is especially true since in the same archipelago, Mauna Loa towers over every...

Posted Monday, 25 May 2020 ‐ CNN

(CNN)Photos and video of Memorial Day weekend celebrations across the US showed plenty of people going to the beach and gathering on boardwalks, but not a lot of people social distancing or wearing masks. From Florida to Indiana and across the country to ...

Posted Monday, 25 May 2020 ‐ CNN

Hong Kong (CNN Business)An online grocery business backed by Asia's richest man is expanding to hundreds of cities across India — a move widely seen as a challenge to Amazon (AMZN) and FlipKart.JioMart, the grocery platform owned by Mukesh Ambani's Jio ...

Posted Monday, 25 May 2020 ‐ CNN

(Kaiser Health News)As states relax coronavirus restrictions, older adults are advised, in most cases, to keep sheltering in place. But for some, the burden of isolation and uncertainty is becoming hard to bear.This "stay at home awhile longer" advice...

Posted Monday, 25 May 2020 ‐ CNN

(CNN)As warm weather sends people outdoors, some are encountering tenacious pests with no respect for social distance. Forget staying 6 feet apart: Ticks go for blood in the hardest-to-reach places on the human body. Many of those ticks are infected with ...

Posted Monday, 25 May 2020 ‐ CNN

(CNN)At a glance, it may look like many Americans have long forgotten about the dangers of coronavirus.Crowds packed beaches in Florida, Maryland, Georgia, Virginia and Indiana over the weekend -- many venturing out without masks and others failing to...

Posted Monday, 25 May 2020 ‐ CNN

(CNN)At first glance, Shelley Allwang's cubicle looks just like any other office space.But alongside a pinboard full of tchotchkes and a photo of her dog, sits a story that reminds Allwang of the importance of her job, now more than ever. "The Boy and...