Could proposed tariffs make BMW prices in the US go up?

[DrVenture]

Originally Posted by BlkGS

A drop on margin does not necessarily mean it's going to be a 1:1 drop in stock prices. Especially if it's an across the board thing. The progressives often talk of a "great reset", this is that sort of thing where the market just has to accept.

I don't have a million dollar portfolio at my age. The average American doesn't either, nowhere close to it. You're not going to find much sympathy from people who complain "myillion dollar portfolio is down $37k because apple has to build in the US". Frankly you're not going to find much sympathy from average Americans for anyone who has aillion dollar portfolio losing even like $200k in value from changes across the board.

The reality is, what's good for wall street and what's good for Americans are two different things. We just saw a massive statement of that. Despite a stock market that's got people who were heavily invested flush with cash, the average person sees the economy in shambles and struggles to get by. The middle class doesn't give a damn about your stock prices, they want better paying jobs and lower costs, and frankly the only way to do that is reduce how much is returned to shareholders or paid to top leaders.

It isn't about sympathy, or nominal amounts. It is about sound economic strategy. One cannot reduce margins without impacting stock prices. A small earnings miss can impact a stock price far more than a 1:1 ratio. When the risk/reward ratio goes out of whack, people flee the stock market for a better risk/reward ratio. When that happens, the first thing that all companies do is start reducing their labor force. This cuts costs and brings things back into balance. Companies rely on investment dollars to fund operations and growth. Jobs and small businesses are the first thing to suffer, when profits erode. No one cares about heir future unborn grandchildren, when they cannot pay the rent.

It is extremely important to understand risk premiums when making investment decisions. Stocks are only desirable, when their earnings are worth the risk.

We have had a GDP of around 3% for the last decade (ignoring CoVid) and are at historic employment levels. It is very hard for me to comprehend why anyone would want to upset the apple cart on a hope and a prayer. Particularly, when we know that the deck is stacked, and the house is still making the rules.

Are we now assuming that the "financial elite" are altruistic? That they are going to torpedo their own ship for the folks in the life rafts? These are people who believe that if you aren't rich, it is your own fault. And they may not be wrong.

[BlkGS]

Originally Posted by DrVenture

We are going to punish China at the expense of our own economy, so that our grandchildren are better off? Or simply shift trade to other countries that also employ slave labor, without actually addressing the overall trade deficit? That seems to defeat the premise of tariffs.

In the process giving up on capitalism, free trade and consumerism? And going after the "financial elite". That sounds very much like textbook communism. As the "financial elites" themselves will be the ones pulling levers and tweaking dials, why would anyone think that they were going to change the balance away from themselves?

The lowering of trade barriers coincided directly with 30 years of economic prosperity. There were winners and there were losers. Overall our economy benefitted greatly. It is also well understood that a healthy global economy is beneficial to the U.S. And that when China's economy goes badly, so does everyone elses. As our economy, and other Western economies, have always done better than many of our European allies, why would we want to emulate them?

Agreed, you have to address the trade deficit. The tariffs are just the first step. You have to also make it so that the US is the ideal place to invest in production and export from. There are certain markets that we will simply never be able to compete in cost effectively. India for example has a burgeoning auto industry making little shit ox cars that sell for like the equivalent of $8-9k. We will never be able to build and export a car to India and sell it for that little. However that doesn't mean that we should open the door for India to undercut our domestic production.

The real issue is that what's really been growing and showing "good for our economy" is the finance industry. Finance does not produce a product of value, and it's largely an industry out of reach of the average American. On the contrary, the financial industry is largely an industry that makes its money by draining it out of other industries. The profit that the finance sector makes is really money that's siphoned off by surprising labor costs, raising margins on products, or making products that require replacement more frequently.

[BlkGS]

Originally Posted by DrVenture

It isn't about sympathy, or nominal amounts. It is about sound economic strategy. One cannot reduce margins without impacting stock prices. A small earnings miss can impact a stock price far more than a 1:1 ratio. When the risk/reward ratio goes out of whack, people flee the stock market for a better risk/reward ratio. When that happens, the first thing that all companies do is start reducing their labor force. This cuts costs and brings things back into balance. Companies rely on investment dollars to fund operations and growth. Jobs and small businesses are the first thing to suffer, when profits erode. No one cares about heir future unborn grandchildren, when they cannot pay the rent.

It is extremely important to understand risk premiums when making investment decisions. Stocks are only desirable, when their earnings are worth the risk.

We have had a GDP of around 3% for the last decade (ignoring CoVid) and are at historic employment levels. It is very hard for me to comprehend why anyone would want to upset the apple cart on a hope and a prayer. Particularly, when we know that the deck is stacked, and the house is still making the rules.

Are we now assuming that the "financial elite" are altruistic? That they are going to torpedo their own ship for the folks in the life rafts? These are people who believe that if you aren't rich, it is your own fault.

I overall agree with your assessment on risk. And something like this would require an unprecedented support system in place. That said, it's overall for the better once the initial strong wears off. And I agree that the financial ite won't suddenly have a moment where their hearts grow 3 sizes in one day and they suddenly become the good guys. It's going to be painful, it's going to require some very unpleasant changes.

I can tell you exactly why people want to kick over the apple cart and burn it down. They see themselves having "better jobs" than their parents but far less buying power. They see that their parents were teachers and drove reasonably nice cars and had a house on a half acre lot and they can't afford a townhouse. People are mad that they're constantly being told how great the economy is, and how much economic growth there's been, but they're not seeing any of it in the middle class, they're getting squeezed out while they see the top earners gaining from everything.

I don't agree with a lot of what the angry mobs want to do, but I do understand why they're so mad. Had myself and my wife not dramatically improved our careers and potential over our parents we would be left behind and pissed too.

[DrVenture]

Originally Posted by BlkGS

Agreed, you have to address the trade deficit. The tariffs are just the first step. You have to also make it so that the US is the ideal place to invest in production and export from. There are certain markets that we will simply never be able to compete in cost effectively. India for example has a burgeoning auto industry making little shit ox cars that sell for like the equivalent of $8-9k. We will never be able to build and export a car to India and sell it for that little. However that doesn't mean that we should open the door for India to undercut our domestic production.

The real issue is that what's really been growing and showing "good for our economy" is the finance industry. Finance does not produce a product of value, and it's largely an industry out of reach of the average American. On the contrary, the financial industry is largely an industry that makes its money by draining it out of other industries. The profit that the finance sector makes is really money that's siphoned off by surprising labor costs, raising margins on products, or making products that require replacement more frequently.

I actually don't think that we need to address the trade deficit. I think it has been very beneficial to the last 30 years of prosperity in the U.S. It has pros and cons, but the advantages are far greater than the disadvantages. Our trade deficit is the product of our prosperity.

Beware of promises to fix things that are not broken.

The finance industry is an integral product of capitalism. Without it, nothing works. Every single company, and the government, relies heavily on financing. And financing doesn't exist, for any company that is not profitable. Think Shark tank here. In a sense, it is what enables a company to be profitable. That financing comes from investors, who are prepared to take risk. Without that, everything grinds to a halt. Those investors come from all walks of life. Pension funds, 401K investors, retirees, bond holders. People seeking income.

This is far too complex and time consuming to continue here. Cheers.

[DrVenture]

Originally Posted by BlkGS

...
I don't agree with a lot of what the angry mobs want to do, but I do understand why they're so mad. Had myself and my wife not dramatically improved our careers and potential over our parents we would be left behind and pissed too.

Final thought - think about this last quote. You and your wife improved your situation, through hard work and determination, and some folks who did not, want to punish someone (China, financial elites, etc) and are prepared to disrupt the economy that you and your wife are counting on, to fix their bad choices. I suspect that as you make your way through life, you will shift your position considerably. There is a notion, often misunderstood and attributed to Churchil, that young people think with their hearts, and older people think with their brains. To me it implies that people are far more pragmatic, when they have something to lose.

It seems that those "left behind" are looking to the "financial elites" to repair their bad choices for them. If that thought wasn't so depressing, it would be humorous. Are we now prepared to disrupt our entire economy for those incapable or unwilling to do what you did? I don't see how that turns out well.

Kudos to you for carrying on a fair exchange of ideas, without resorting to straw men, inference, sarcasm, ad hominem attacks, or antagonism.

[ToddRGuy]

Anything at this point, is speculation of course, but considering that the United States exports about 15% of its vehicles to the European Union, which is the US' second-largest export market for vehicles and the EU imports about 12% of its vehicles from the US, and exports over a fifth of its vehicles to the US, there seems to be a certain amount of reciprocity going

When you couple this information, with the fact that BMW supports over 23,000 jobs, directly or indirectly, based on manufacturing at Spartanburg and that plant alone generates $3.1 billion in wages and salary for South Carolina, it would seem counter intuitive for this to get out of hand.

Any government that invokes heavy-handed tariffs on imports will mostly like experience heavy handed tariffs on their exports. We live in a global economy, where dispensing pain comes with significant consequences.

[BlkGS]

Originally Posted by DrVenture

Final thought - think about this last quote. You and your wife improved your situation, through hard work and determination, and some folks who did not, want to punish someone (China, financial elites, etc) and are prepared to disrupt the economy that you and your wife are counting on, to fix their bad choices. I suspect that as you make your way through life, you will shift your position considerably. There is a notion, often misunderstood and attributed to Churchil, that young people think with their hearts, and older people think with their brains. To me it implies that people are far more pragmatic, when they have something to lose.

It seems that those "left behind" are looking to the "financial elites" to repair their bad choices for them. If that thought wasn't so depressing, it would be humorous. Are we now prepared to disrupt our entire economy for those incapable or unwilling to do what you did? I don't see how that turns out well.

Kudos to you for carrying on a fair exchange of ideas, without resorting to straw men, inference, sarcasm, ad hominem attacks, or antagonism.

Nobody grows when things devolve to a fight rather than a debate. Ultimately, I think subjects like this are far too complex for most people to discuss, let alone intelligently, and so they just devolve into shouting matches with various talking points they heard other people say.

To your point, nothing i did couldn't be replicated by other people. It was not easy, but we lived within our means, made smart decisions about where we lived and worked, and ended up here. I consider myself a realist, and the reality is that we will never have the kind of manufacturing based economy of the 50s, 60s, even 70s or 80s again. We have made the country and world a far smaller place, now much more dominated by larger companies. You're never going to see regional based manufacturers return, where certain companies manufacture goods in one area and really only sell in that area. It's rare to see companies that manufacture and are present in only one country now.

All that said, I have two young kids. My focus is on making their lives better than mine was. I don't want them at risk of being drafted to fight China in WW3. I don't want them to be at risk of the myriad of calamities that relying on your #1 world enemy for your supply chains comes with. I don't want them to have to live in a society where the CCP has offices for their own police forces on US soil, or where the CCP has a large number of decision makers, thought leaders, and others on their oayrolla or in their pockets.

Because I don't want my kids to suffer, I am all for hard times now to free ourselves from China's grip. The longer we wait, the worse it will get.

[BlkGS]

Originally Posted by ToddRGuy

Anything at this point, is speculation of course, but considering that the United States exports about 15% of its vehicles to the European Union, which is the US' second-largest export market for vehicles and the EU imports about 12% of its vehicles from the US, and exports over a fifth of its vehicles to the US, there seems to be a certain amount of reciprocity going

When you couple this information, with the fact that BMW supports over 23,000 jobs, directly or indirectly, based on manufacturing at Spartanburg and that plant alone generates $3.1 billion in wages and salary for South Carolina, it would seem counter intuitive for this to get out of hand.

Any government that invokes heavy-handed tariffs on imports will mostly like experience heavy handed tariffs on their exports. We live in a global economy, where dispensing pain comes with significant consequences.

I think a lot of people are caught up in hysteria because certain media outlets like to exaggerate things.

To your point, there is some reciprocity going on between the US and EU. While we would love to export more vehicles to the EU, and there are many great reasons to do so, the idea that we are going to levy stuff tariffs against EU countries seems far fetched. China, absolutely. But Germany, the UK, etc? Not very likely. Instead you solve that issue by saying "we are going to match the trade barriers you've put in place on us if you don't remove them", and you make it easier to do business here than there (large this is already the case, when I graduated college interviewed at BMW in SC. Talking to their plant HR Director, she told me in no uncertain terms that BMW built that plant to escape the German unions. The plant works VERY hard to keep employees happy so they see no need to form or join a union, because if they did, it would only spell doom for the plant).

The US and EU have overall always enjoyed a fairly positive relationship, even if there's some. Disagreements along the way. I doubt there will be any real issues between the two during the next presidential term.

[BlkGS]

Switching gears a bit, the original question was if car prices might go up. As a counter point, there's a very real possibility they go down on Day 1, or very near to it.

If CAFE is gutted, and CAFE fines are immediately suspended and forgiven while CAFE standards are rolled back, that could drop prices by THOUSANDS on each new car. And this could be done by executive order day 1

Food for thought, the doom and gloom is unwarranted.

[BMWCCA1]

What happened to Republicans, the party of the free-market economy?

[tturedraider]

It’s amazing to me it that after four years of experience with Trump it seems the vast majority of people still don’t understand how he operates.

[RED_Y_]

Originally Posted by BlkGS

The middle class doesn't give a damn about your stock prices, they want better paying jobs and lower costs

Sure thing, but that's the catch, you can't have both. You want to spin up factories, pay decent rates and lower costs? Not going to happen. Don't get me wrong, I would be happy to buy something that says "Made in USA" on it. Even my X5 built in US from foreign parts. But what happened to free enterprise system? We now will dictate to business that they have to move their manufacturing to US or suffer higher tariffs?

[Cortexiphan]

Originally Posted by BlkGS

Any discussion on this right now is just hysteria.


BMW is in a far better situation than most automakers as most US production is built here, and much of the supply chain is here or in Europe. On the other hand you have Lincoln or Buick that are importing cars built in China, which will be effectively unsellable. Good riddance.

Proposed tariffs is not just from China, but from all countries. Including Mexico and EU.

[CLTMDA]

The original question was, "could prices go up due to tariffs?"

The absolute answer is "yes, they could", but will they?

The real question is will what happens over the next few years with respect to tariffs directly cause BMW car prices to go up? If you know the answer, invest appropriately.

We do not know any details. There are many things that "could" happen.

And for those that think the world is a free market economy, good luck to you. Government subsidies do not make for a level playing field and those are just indirect tariffs. I been part of the aircraft market in my distant past and dealt with Airbus, Boeing and McDonnel Douglas. That market was not a level playing field, too many external forces that justify the jobs of hundreds of thousands of "analysts".

[DrVenture]

Originally Posted by Cortexiphan

Proposed tariffs is not just from China, but from all countries. Including Mexico and EU.

I like your screen name. Was a big fan of the show.

[tracer bullet]

There'd be a certain irony if the guy elected to "fix inflation" implemented tariffs and made half the things sold at WalMart suddenly go up in price. BMW owners are probabyl mroe able to handle it, but the average Joe not so much. On topic if tariffs are implemented then yes the costs will go up. It's a shell game, nothing more.

[IanH]

Originally Posted by DrVenture

I like your screen name. Was a big fan of the show.

I have it on bluray! Wife and I rewatched it during the pandemic, truly holds up so well.

[STi from DSM]

You will always see a steady increase in the price of cars in general. Will Tariffs affect the price of BMW's. I am sure some of their supply chain will be affected, but I would think that portions of this are absorbed and portions are passed on to the consumer.
To answer the OPs question yes it will affect the prices, but there are more factors than just tariffs that affect the price of vehicles.

[Bret]

Originally Posted by BMWCCA1

What happened to Republicans, the party of the free-market economy?

The problem is that we didn't end up with free trade between the US and some countries. China is a good example of that. They could sell their products freely into the US, but the sale of US products into China has been heavily restricted. Sure, we end up getting inexpensive products, but it comes at the cost of US manufacturing. If there's truly free trade between countries, the markets of both countries are equally open to each other without government subsidies. Free market trade between countries also requires that countries support the intellectual property rights of each other. Chinese companies steal US intellectual property and their government condones it.

Originally Posted by CLTMDA

I been part of the aircraft market in my distant past and dealt with Airbus, Boeing and McDonnel Douglas. That market was not a level playing field, too many external forces that justify the jobs of hundreds of thousands of "analysts".

When I worked at Gulfstream Aerospace over 30 years ago, French subsidies to Airbus were always an issue. We were always at a price disadvantage because of this.

I had a meeting earlier this week that may relate to tariffs. I got a call from an architectural firm that designed a couple of buildings for our business. The lady that called told me that she had a couple of clients that she wanted to show around our R&D facility. I told her that was no problem, and we arranged the tour. When the tour group showed up, the two clients were Chinese. They told me that their company makes LCD instrument displays for the automotive industry. They sell throughout the world from China but said that they have to manufacture in the US in order to get business with companies that manufacture cars in the US. I didn't pry as to why, but there are two possibilities that I can think of. The first is that tariffs might make it so they're not price competitive if they manufacture in China. The other is that the import of these key parts isn't allowed from China because it could allow them the ability to stop production of cars in the US if they cut off their supply. Oddly, GM, Ford and Stellantis are already customers of theirs overseas. They said that Hyundai and Kia are prospects that they're hoping to do business with once they start manufacturing in the US. For those who don't know, there is a Kia manufacturing facility in west Georgia and a Hyundia manufacturing facility in the middle of Alabama.

[CLTMDA]

Originally Posted by Bret

The problem is that we didn't end up with free trade between the US and some countries. China is a good example of that. They could sell their products freely into the US, but the sale of US products into China has been heavily restricted. Sure, we end up getting inexpensive products, but it comes at the cost of US manufacturing. If there's truly free trade between countries, the markets of both countries are equally open to each other without government subsidies. Free market trade between countries also requires that countries support the intellectual property rights of each other. Chinese companies steal US intellectual property and their government condones it.


When I worked at Gulfstream Aerospace over 30 years ago, French subsidies to Airbus were always an issue. We were always at a price disadvantage because of this.

I had a meeting earlier this week that may relate to tariffs. I got a call from an architectural firm that designed a couple of buildings for our business. The lady that called told me that she had a couple of clients that she wanted to show around our R&D facility. I told her that was no problem, and we arranged the tour. When the tour group showed up, the two clients were Chinese. They told me that their company makes LCD instrument displays for the automotive industry. They sell throughout the world from China but said that they have to manufacture in the US in order to get business with companies that manufacture cars in the US. I didn't pry as to why, but there are two possibilities that I can think of. The first is that tariffs might make it so they're not price competitive if they manufacture in China. The other is that the import of these key parts isn't allowed from China because it could allow them the ability to stop production of cars in the US if they cut off their supply. Oddly, GM, Ford and Stellantis are already customers of theirs overseas. They said that Hyundai and Kia are prospects that they're hoping to do business with once they start manufacturing in the US. For those who don't know, there is a Kia manufacturing facility in west Georgia and a Hyundia manufacturing facility in the middle of Alabama.

When were you at Gulfstream? I actually worked on the financial audit for a couple years around 1991 with a couple people that ended up leaving the accounting firm to go work at Gulfstream in a couple higher up positions, last names Skinner and Wallace.

[Bret]

Originally Posted by CLTMDA

When were you at Gulfstream? I actually worked on the financial audit for a couple years around 1991 with a couple people that ended up leaving the accounting firm to go work at Gulfstream in a couple higher up positions, last names Skinner and Wallace.

I was there from 1990 until 1992 every other school quarter doing a co-op program during college. Those names aren't familiar. I worked in various engineering departments while I was there. It was very interesting to see how the jets were built. It seems kind of scary, but there are literally planes flying around today with parts in them that I designed or modified.

[Bret]

I agree that free and fair trade is most beneficial to everyone, but it has to be just that. We can't let the desire for it put ourselves in a position where those who declare us the enemy have us by the balls. We are in less of that position today than we were eight years ago. Unfortunately, such a wholistic strategy literally comes at a cost.

On a related note, a year or so ago my IT manager discovered that the Chinese cameras that we have in one of our buildings were creating excess traffic on our network. It turns out that they were trying to send video back to China. The unauthorized traffic was blocked by our firewall so it couldn't get out, but we couldn't risk having such a vulnerability on our network. We had to replace them all. In the end, the Chinese cameras cost us more than the more expensive ones would have.