TRG | The Bottom Line – 3/28

TRG last week hosted an international trade representative from one of the most influential firms in Washington, D.C. to discuss the likely implications of the Trump administration’s trade war. Our conversation provided a broader understanding of the historic uses of tariffs, the administration’s ultimate goal, specific industry winners, an aggressive prediction, and even a take on our next highway bill.  Once the tariff dust has settled, we believe our coverage universe is well positioned to benefit. The key takeaways included: 1) More reciprocal agreements than trade wars. Although the administration, thus headlines, constantly threaten “trade war”, bilateral negotiations are being held. Even among the “Dirty Dozen” – the mostly unnamed countries who are deemed the most egregious violators of fair trade, are working towards a deal. A Reuters report recently noted 87% of goods coming from India to the U.S. would be hit by new tariffs – potentially devastating to Inda. 2) Significantly more investments to be made in the U.S. According to our trade rep, the administration’s goal is to return the manufacturing base to the U.S. boosting jobs and, in some instances, national security. Since Trump began beating the tariff drum, several companies have announced either new or increased investment in the U.S., many with the direct intent of avoiding tariffs. When asked what be would remembered about this time 5 years from now, our guest cited the number of companies making significant investment in the U.S. – not tariffs.  In fact, just since our call last week, Hyundai announced a $21B investment, moving its planned Mexico plant to the U.S. (note Volkswagen and Honda are also considering moving new production to the U.S.), Nvidia announced hundreds of billions in new investment over the next four years, Johnson & Johnson increased its investment by 25% to $55B, and the UAE committed $1.4T across AI, energy, and manufacturing over the next decade. 3) GOP will not be outdone on next highway bill. Back in 2018, Trump 45 touted an infrastructure initiative leveraging $200B  in Congressional spending into $1.5T through private investments. Disagreements in Congress, unfortunately, prevented a plan from ever being approved. President Biden, however, passed his nearly $1.2T IIJA within his first year in office. Look for Trump 47 to make a second run at an infrastructure bill that surpasses IIJA in size. Importantly, the GOP may also want to prove it, too, can pass a major infrastructure bill.