More tariff threats and uncertainty... 30% on the EU and Mexico... 100% on Russia's partners... More of your experiences with tariffs... Industry struggles... A 'nightmare scenario'... The long game... Inflation watch...
It was another threatening weekend...
For anyone seeking greater clarity on tariff policy – as many small-business owners have said they are in our feedback lately – this weekend did not deliver. In fact, it was exactly what you didn't want to hear...
On Saturday, President Donald Trump posted on his Truth Social account that the U.S. would impose 30% tariffs on the European Union and Mexico starting August 1, presuming some kind of deal isn't reached.
For European nations, this proposed number is higher than the 20% "reciprocal" tariff Trump announced against the EU on Liberation Day in April.
Meanwhile, the new proposed tariff rate on Mexican goods is chalked up as "fentanyl related." It's not clear if a deal earlier this year – which exempts goods that fall under the U.S.-Mexico-Canada trade agreement from Trump's first term – applies in this case.
The threats are probably just a starting point for more negotiations, as similar statements from Trump have been throughout this year. I (Corey McLaughlin) suspect that's why the market reacted with a shrug to this news on today's open.
The major U.S. indexes traded mixed this morning. They didn't even falter after Trump said today, in a bid to end the war in Ukraine, that any country doing business with Russia could face a "secondary tariff" of 100% if there is no peace deal within 50 days.
The tariff uncertainty doesn't help, though...
As we shared here last week, current trade policy from the White House has eaten away at profit margins of small businesses (including many owned by our subscribers). And without knowing which rates will stick, businesses have been paralyzed from making decisions and investments for much of this year.
We'll soon see some more reports on how tariffs are or are not impacting corporate America, too, as another earnings season gets going in earnest this week. The big banks begin reporting at the end of this week.
Meanwhile, your feedback keeps rolling into our inbox... If you missed what I'm referring to, here's Day 1, Day 2, and the mail below Dan Ferris' latest Friday edition with your mail about tariffs, including many firsthand experiences running businesses.
Today, we continue sharing your feedback, first up with some "boots on the ground" reporting courtesy of subscriber E.R., who visits various manufacturing facilities as part of his day job. He has seen three in the past few weeks and passed along his observations.
The first facility was a wax manufacturer in Pennsylvania...
Prior to tariffs, almost all their wax was sourced from China. Only a small amount was purchased locally to keep a relationship with these suppliers in case of supply disruptions (a good move as it turns out). Initially, the Chinese did not lower their prices to offset tariffs, so they switched to purchasing 100% locally (Exxon/Chevron/etc.). Eventually, the Chinese lowered their prices to offset almost all of the tariff, and the domestic suppliers raised their prices, so they are now getting 50/50 domestic and Chinese.
The biggest loser here was [infrastructure company Kinder Morgan (KMI)]. [The wax business] had been renting several storage tanks from [KMI] to hold their imported Chinese wax. Due to the reduced volumes of imports, they are terminating all those leases.
The second company was a manufacturer/supplier of flavor chemicals in New York. Of the three, E.R. said this one was the most concerned about tariffs...
So far, they are managing to keep production up and running and are covering their costs of production profitably. But the unpredictability and potentially punishing tariffs are very real concerns. They pointed out that the chemicals they are buying are not available domestically, the reason being that the environmental regulations don't allow for these products to be made in the US. (I am sure that the current administration is trying to relax those environmental regulations, but... even if they do, will manufacturers risk capital when the next administration can bring back the old rules?)
There seems to be a shift towards increasing the amount they manufacture in-house, and less is being resold from purchased materials, but they can't make everything in-house. I am also seeing somewhat of a shift from China to India and Indonesia, but China is still a crucial supplier.
The third facility was a contract chemical manufacturer in Connecticut, and "my contact there was very gung-ho and excited about the tariffs," E.R. said...
He pointed out something very important; material that is reprocessed and exported is eligible for a refund on any tariffs paid on its importation. It is a paperwork headache, but it does fundamentally keep the U.S. manufacturers competitive on export products despite the tariff. He actually lost a client whose product is exclusively for export, but didn't want to bother with the paperwork, but said that two clients considering leaving stayed, and he thinks a few new big customers will come their way because of their tariff concerns. (The type of work he does I am increasingly seeing being done in India. It makes sense to me that tariffs will help him keep and grow the business.)
But for some sectors, it's a "nightmare scenario," as subscriber A.F. writes...
My daughter manages costume fabrication for a large entertainment venue. She orders lots of fabric as well as some already made apparel. Try managing costs when you have no idea what the tariffs will be. It's not like we have American textile manufacturers that can supply the fabric they need to make these costumes. Silk is primarily made in China, which produces about 80% of the world's silk. India follows as the second-largest producer, while other significant contributors include Brazil, North Korea, Thailand, and Vietnam. China is also the largest producer of fake fur and linen. Her suppliers include companies in Vietnam, India and China.
Add the effect of the loss of international tourism due to the administration's hostility toward other countries, and she is faced with a nightmare scenario – rising costs and decreasing revenues. I suspect it is only a matter of time before we see massive layoffs in tourism-related employment here.
Subscriber D.B. described the effects of tariffs in the seafood industry...
I am a seafood distributor who services both foodservice distributors and some local restaurants.
My primary product line is freshwater fish from the Great Lakes, mainly Lake Erie Yellow Perch and Walleye. These products are almost exclusively harvested and processed in Canada, about an hour from the bridge to Detroit.
There is not close to enough American infrastructure to alter this activity. A proposed 35% tariff on a $10 price of walleye fillets to restaurants will now mean $13.50 per pound. This will be very damaging to local small businesses.
Also, I have seen increases on all imported seafood products, such as shrimp, and many others that are only produced internationally.
As we know, tariffs by definition are to "level" the climate if a country is a bad actor to another. However, in this universe, they are simply taxes that I must pass on to my customers... What a lousy way to have to be in business. Sad.
Then there's the impact abroad...
Here's subscriber S.K...
I live in South Africa. We have had a motor manufacturer in our city for over 80 years. They are our biggest employer. They have indicated that because of the new 25% tariffs imposed by the U.S. they will shut down the plant.
Here's T.B., with a related take...
One thing the financial world is not addressing is the massive unpopularity of Mr. Trump here and abroad (outside of his MAGA base) and the effect it is having: 1) Loss of tourism 2) countries purchasing less from us 3) countries forming new agreements with BRIC countries etc. 4) a false narrative that products can be produced here without substantial price increases 5) to be the reserve currency of the world means having trade deficits in order to have access to cheaper goods.
More about the 'long game'...
We've been getting some more comments along the lines of "what this all means," which is important to think about. Here's M.C., who points out the situation has been decades in the making...
I have often wondered if we had continued to make "stuff" in America instead of shipping manufacturing to China starting in the 70's if we would even notice that the prices of American goods are supposedly higher than the great "stuff" from China? One item in particular that caught my eye recently was ball bearings. We do not make ball bearings in the U.S. anymore, I guess. Why? Cost? Nonsense.
I also remember a "made in Japan" craze from decades ago. Their economy took off after WWII with our help and then everything was made in Japan. Why did we not learn the lesson at that point in time? A country makes "stuff" that we used to make here; who loses? We do and we help them do it. I wonder if that isn't a little bit stupid...
Yes, the tariff tantrums have hurt my wife's place of business (a small agricultural/industrial supply company), but as others have said, in essence. No pain no gain. Donald Trump even said that there would be growing pains...
Subscriber J.R. says to just avoid imported goods...
Why is it everyone seems to lose sight of the fact that if you buy American, you'll have no tariffs. Yes, I understand that as of right now a lot of products are not readily available to be made in America, but hopefully with a little foresight and perseverance, many of them will return.
Play the long game.
Yet here's another school of thought, from subscriber E.D...
I'd rather be an American than buy American. I want the choice to buy whatever I want from wherever I want...
The near-term questions...
The above are big topics... unlikely to be solved in weeks, months, or one political cycle. In the shorter term, though, there are also questions about the immediate impact of tariffs.
Last week, for example, we wrote that Trump has been saying the U.S. is "raking in the dough" (our phrase). Subscriber T.W. wrote in to question that and brings up a timely point about inflation instead...
How can the U.S. be "raking in the dough" from import tariffs? Tariffs are paid by the importer, not the exporter. Any 'dough' that is raked in comes from domestic importers on our soil, not from foreign suppliers. It is money that is already in this country. It is just being taken from the hands of American businesspeople and put in the coffers of the government. The American importer must either go out of business or raise prices.
The desirable third option of finding a low-price supplier within the U.S. is not available because we have decided not to allow a lower class in this country, or rather to have low paid labor and lesser regulated production processes occur offshore where we can't see them. We can't have it both ways. Either we allow a free-market economy or pay through the nose for the temporary privilege of being insulated from the vision of hard work for low pay in our backyard.
These tariffs are inflationary by design and intention. No effort is being made to balance the budget or lower the national debt. Rather than austerity, the choice has been made to inflate the debt away. The cost will be paid by devaluing the savings of those who believed in the American dream and were savers, as well as by those who have no savings but will have to pay higher prices for everything. This is lose-lose. We can't win by doing more of what doesn't work.
I believe we should be looking to the example of what [President Javier] Milei is doing with Argentina as our best direction for the future. Bite the bullet, suffer temporarily, come back stronger and more functional.
Wow. What a great discussion playing out here... Keep your notes coming.
Inflation watch...
We'll close with a point that T.W. brought up – inflation – because it could influence the near-term direction of the markets this week. Tomorrow, the government will share the latest consumer price index ("CPI") reading, covering June.
Mainstream economists are expecting that this report will show at least some impact of tariffs on consumer prices. Consensus expectations are that prices will come in about 2.6% higher year over year and rise a little more than 0.2% month over month.
This same group of economists expects so-called "core" CPI – which excludes food and energy prices – to grow by 0.3% from last month and 3% from last June.
Overshoots or undershoots in these numbers could lead to volatility in stocks – for the worse or better, respectively.
The more inflation we see now (or the market expects in the future), the longer interest rates will stay higher. That could mean more near-term problems for stocks.
Alternatively, less(er) or mild inflation that comes in below expectations – like what was reported last month, covering May – will bring thoughts of Federal Reserve rate cuts to the forefront. That could add fuel to the already juicy market environment we've seen the last few months.
New 52-week highs (as of 7/11/25): First Majestic Silver (AG), Alpha Architect 1-3 Month Box Fund (BOXX), iShares U.S. Aerospace & Defense Fund (ITA), Lynas Rare Earths (LYSDY), Planet Fitness (PLNT), Sprott Physical Silver Trust (PSLV), Ryder System (R), Sprott (SII), Skeena Resources (SKE), iShares Silver Trust (SLV), TransDigm (TDG), and ProShares Ultra Semiconductors (USD).
We shared a lot of your notes above on tariffs. Do you have a story, comment, or question? Keep your notes coming, as always, to feedback@stansberryresearch.com.
All the best,
Corey McLaughlin with Nick Koziol
Baltimore, Maryland
July 14, 2025
