5. Market Update
sources: HiddenLevers, NY Times, CNBC, Kitces Blog, CNBC
New Advisor
Model
Marketplaces
GOP Agenda
Running in
place
Yellen Fed
Now
Irrelevant
8. Protectionism: Global
sources: HiddenLevers, IBTimes, CNN, CNN 2, Xinhua, Guardian, Daily Beast,
UK
First year as top
10 US trading
partner, not on
Trump’s radar
Much lower
trade deficit
than China/Mex
IT sector getting
hit from Trump
H1-B shift
France Mexico China India
Promoting
domestic
consumption
since 2009
financial crisis
Growing clout
with Europe +
EM as it turns
away from
unwelcoming
western
markets
Out of EU, into
better trade
deals on its own
+1.7% Highest
GDP in first world
60% of business
leaders saying
Brexit already
having negative
impact on firm
Fear of Le Pen,
heavy populist
agenda
Gap between
German +
French Yields
greatest ever
China-France
new deals on
nuclear +
industrial chain
Will retaliate
against US,
eliminating US
jobs
Pivoting away
from USA –
Spain, Lat Am
China-Mex
relations at an
all time high
9. • Tariff of Abominations (1828)
• Tariff of 1857
• Morrill + Civil War Tariffs
(1861-1864)
• Smoot-Hawley Tariff (1930)
• Trade Agreements Act (1934)
Protectionism: Historical Analogies
Sources: HiddenLevers
$1.06
$0.97
$0.91
$0.79 $0.78
Year 1929 1930 1931 1932
U.S. Real GDP ($ Trillion)
11. Border Tax: 101
Sources: HiddenLevers, Daily Signal
2015 U.S. GPD:
$18tn
Imports
$2.7tn
Exports
$2.2tn
The great majority of GDP is still domestic.
12. Border Tax Opponents:
Wal-Mart and major retailers
Koch Industries and oil refiners
Border Tax: Corporate Civil War
Sources: HiddenLevers, Fortune, Bloomberg
52-48
GOP
Border Tax Supporters:
Boeing, GE, Oracle
20 other major exporters
GOP can only lose two votes in Senate:
Tom Cotton (Arkansas - Wal-Mart)
David Perdue (past Dollar General CEO)
both opposed
13. Border Tax: Winners + Losers
sources: HiddenLevers, Reuters, Goldman Sachs
Retailers, Apparel,
Tech Hardware suffer
Aircraft, Software,
Media benefit
WINNERS
Discount Retailers
(Chinese imports)
Net Import Share of Products by Industry
Drivers also suffer –
gas prices may rise 30
cents to offset tax on
imported oil
14. Border Tax: Currency Impact
Sources: HiddenLevers, Nasdaq, Markwetwatch
USD action in 2017 shows
border tax less likely
Rise in value of USD now may
reign in US economy
Currency shift has 5y lag from
trade balance
+8%
-2.5%
15. Border Tax: Threat of Retaliation
sources: HiddenLevers, Financial Times,
WTO
CHINA
MEXICO
18. GOOD: Tax Plan Works
source: HiddenLevers
Corporate civil war ends up growing GDP
USD gains mostly
priced in
Exporters win
foreign revenue
not taxed
Import tax doesn’t
harm corporate
tax cuts
19. BAD: Punishing Mexico
source: HiddenLevers
Border Tax kills Mex imports / labor / repatriation
US impact
limited, but US
jobs will be lost
Loss of
immigrants
hurts US GDP
US auto + retail
hurt – lot of
Mex connects
20. UGLY: Trade War
source: HiddenLevers
China + Mexico retaliate as Border Tax takes effect
Heavy GDP loss,
China likely the
winner
Warning on
1:1 trade duties
has been given
China winning
trading friends
globally
21. SCENARIO: De-Globalization
Good:
Tax Plan
Works
Bad:
Punishing
Mexico
Ugly:
Trade War
USD
-10%
S&P 500
-25%
USD
FLAT
S&P 500
-5%
USD
+6%
S&P 500
+14%
The positive impact of
corporate and personal tax
cuts overwhelms the
negative impact of import
taxes, driving growth and
market gains.
President Trump has singled
out Mexico, and might
attempt a tariff or a NAFTA
rollback, with modest US
impact.
A trade war with China or
other major trading partners
might ensue if the BAT is
passed. Economic growth
could fall as a result, driving a
correction.
22. De-Globalization– Take Aways
Exporters win, Importers lose
Big risk = trade war
Border tax plans will struggle
in US Senate
Protectionist US
handing leadership
baton to China
