How you can profit from Trump’s coming trade wars
From Nick Rokke, Analyst, The Palm Beach Daily:
The U.S. auto industry was dying…
In 1981, American automakers General Motors, Ford, and Chrysler were getting whipped by their Japanese rivals.
The Big Three had become content and took the market for granted…
They were making cheap, inefficient cars like the “luxury” Cadillac Cimarron (a dressed-up Chevrolet Cavalier sold at twice the price).
Meanwhile, the Japanese were producing cheaper, high-quality cars… The Toyota Celica and Nissan Gazelle were eating away at U.S. sales.
During the 1940s, the Big Three accounted for 85% of the U.S. auto market. By 1980, that had dwindled to less than 70%.
Nearly 200,000 auto jobs were lost between 1981 and ’82.
Then, Ronald Reagan stepped in and saved the industry…
President Reagan got Japan to approve a “voluntary” export restraint agreement that reduced the number of cars it exported to America.
(We can assure you that Japanese carmakers didn’t agree voluntarily.)
With Japanese automakers out of the way, U.S. manufacturers jacked up prices.
According to one study, the price of the average car rose by $2,600—or about 50%—in the four years after the agreement was approved.
The deal was terrible for consumers… but great for U.S. carmakers.
Profits shot higher… and so did stock prices. Just look at the chart below.
Here’s why we’re telling you about the U.S. auto crisis in the 1980s…
A New Trade War in the Offing
President Trump has pledged to restore U.S. manufacturing by enacting protectionist policies such as tariffs.
Just as Reagan’s agreements created winners (U.S. car manufacturers) and losers (U.S. consumers), so will any trade restrictions passed by the Trump administration.
Now, we’re not sure what President Trump will do… We’re not even sure if he knows.
But we do know certain companies will thrive if he imposes trade barriers.
As we’ve stated before, we’re no fans of trade barriers. Free trade is best for consumers because it lowers prices.
But we deal in reality… And we want to make you richer every day, regardless of the politics at hand.
That’s why we surveyed the landscape to identify the U.S. companies that will do the best—and the worst—under Trump’s policies. We’ll put the winners into a special “America First Portfolio.” But first, the losers…
The Biggest Losers…
The U.S. companies that could potentially take a beating under Trump are those with international supply chains and that derive a majority of their sales from abroad.
Plane manufacturer Boeing (BA) is one example of these big multinationals.
About 70% of its sales come from overseas. If we get into trade wars, countries could easily place tariffs on Boeing planes, making them less competitive.
Boeing also imports a lot of its plane parts. So any taxes on imports would substantially increase its cost to build planes.
That’s a double whammy.
Another example is Illinois-based food company Mondelez. The company makes Oreo cookies, Trident chewing gum, Toblerone chocolate, and other snack products.
About 80% of its sales come from overseas. These sales would be in serious jeopardy in a trade war.
And don’t think countries won’t place tariffs on Oreos or chewing gum.
When the United States put a tariff on Chinese car tires in 2009, the Chinese retaliated by taxing American chicken feet exports.
No product is immune to a trade war.
Now let’s turn to the winners…
Introducing the “America First Portfolio”
The biggest winners of a trade war will be domestic producers and service providers.
Two large companies that should greatly benefit are tobacco giant Altria (MO) and Southwest Airlines (LUV).
Altria (formerly Philip Morris Companies Inc.) uses mostly homegrown tobacco. And it sells its cigarettes only in the U.S. Its international operations are handled by a spin-off called Philip Morris International.
Most of Southwest’s routes are domestic. If travel restrictions arise due to a trade war, fewer Americans will vacation abroad. Instead, they’d do more travel at home. That would be a boon to Southwest.
These two companies will be the first two positions in our new “America First Portfolio.”
In this portfolio, we’re going to put the best American companies not affected by border taxes, tariffs, or quotas.
If Trump keeps his pledge to put America first, then you’ll want to own the companies in our America First Portfolio.
In tomorrow’s issue, we’ll add the final nine companies. You won’t want to miss it…
Nick Rokke, CFA
Crux note: It may take months – perhaps years – before we see Trump’s “America First” policies come to fruition. But Palm Beach Letter readers are making big profits RIGHT NOW on another major trend – in fact, it’s one of the fastest-growing trends in America. In the past 90 days, PBL readers have pocketed gains of 22.9%, 195.7%, and 230.8% on this trend. And over the next few months, the profits could be even bigger. Learn all about this little-understood trend right here.