Revolution

In years past most companies sold stock to get money for growth but in recent years companies have turned to private equity firms like Blackstone and Carlyle. The advantage is that private equity firms are not subject to government oversight. Thus, they can offer a higher return with lower risk and that in itself should be a warning. A public company can be quickly evaluated by its stock price but with private equity the public must rely on managements value. As the number of private equity firms end up in bankruptcy the public trust is waning and the growth in this area is declining. This decline is part of the Trump revolution. The economy is moving away from the trend toward finance back to the old ways of manufacturing. The influence of the big banks will also lessen as smaller banks begin to make business loans. Big corporations will rely less on mergers and start to build new facilities which means more emphasis on manufacturing. For people who were adults in the 50’s and 60’s this will be a return to the old days but for most people this will be a new experience.

Trade

A good example of the unfairness in tariffs can be seen with the difference between the US and Germany when it comes to auto imports. The US charges a 2.5% tax on German auto imports and Germany charges a 10% import tax plus a 19% value added tax. In the United States, the Cadillac Lyriq is available from $58,590 but customers in Germany, where the EV has just been launched, will have to pay almost $30,000 more for one. The new Trump proposal increases the US tariff to 25% but it still leaves the US in and unfair situation. Other European countries also have tariffs plus value added taxes. Almost all of the US trade partners are charging higher tariffs than the US and Trump is attempting to minimize the difference while still giving other countries the advantage. These other countries are not happy as they see Trump’s fair-trade policy as unfair to them. This is an attempt to reduce the one trillion-dollar US trade deficit. The plan is to encourage other countries to lower their tariffs which in turn will allow the US to lower tariffs and in the long run have lower tariffs for all countries.

War

During the three-year Ukraine War more than one million have been killed or injured but the battle rages on. The war has resulted in widespread destruction, displacement and a humanitarian crisis, with millions facing food insecurity, lack of basic necessities and trauma, while also causing significant damage to infrastructure and disrupting education and healthcare. Meanwhile those in the West are safe in their homes and the military industrial complex racks up the profits as they restock their weapons of war. The West has contributed $287 billion to the war effort. Grain exports are down resulting in food shortages in Africa. Natural gas is cut off from Europe resulting in a 400% increase in utility cost and a two-year recession in Germany. Recent polls show Americans favor continued support for Ukraine even if it prolongs the war. It appears that they agree with Biden’s, as long as it takes, plan.

Change

As the Trump revolution gets underway, it is time for a review of how we got here. It began at the end of WW 2 with the formation of the United Nations followed closely by NATO. The 50-year cold war signaled a change in the world order with the US being at the top of the heap. As the battle between communism and capitalism took hold, technology led the way to automation and increased productivity. The next step was the movement of industrial jobs to lower wage markets like China. As manufacturing moved out the service economy filled the gap and this opened the door to the modern American financial business. This brought low inflation and low prices for imported consumer goods but it was a death blow to good paying manufacturing jobs in the US and Europe. While the wealthy people and large corporation saw their fortunes rise the working people saw their wages stagnate. Companies began moving over seas and taking the jobs with them. Our country has suffered from rising income inequality and chronically slow growth in the living standards of low- and moderate-income Americans. This disappointing living-standards growth—which was in fact caused by rising income inequality—preceded the Great Recession and continues to this day. The policies of Biden, American First and Trump make America Great, have attempted to reverse this trend and those who have profited from the global economy are fighting against these changes.

Hyundai

When Hyundai started its new plant in Georgia in 2022 to build electric cars, many people wondered about such a decision. The future of EV’s was in question at the time and even more so today. At the grand opening this week, the talk was slightly different with no mention of EV’s but talk about hybrids. Will this change again and move toward gasoline cars? If the US introduces tariffs on imported cars, Hyundai will be encouraged to produce gas power cars here in the states. The demand for Hyundai will be high, at least at the start, as other companies try to build new production plants here in the US. This plant is designed to produce 500,000 cars per year and the demand will be there if imports slow down because of tariffs.

France

This week, after a nine-week trial, Marie Le Pen and 24 others from her campaign were convicted of misusing $3 million dollars of European Parliament funds to pay for party staff between 2004 and 2016. All have denied the charges. It was established that these people were working for the party but had no specific task. Until this week Le Pen, the leader of the far-right party, The National Front, was the likely winner in France’s next presidential election set for 2027. She was banned from holding public office for the next five years.

Cars

Those who profited from globalization are concerned as Trump leads the world away from the old established ways and into the make America great world. The news is predicting a downturn in the world economy as one of the first changes takes place this week. Trump is introducing reciprocal tariffs. This means that if any country charges tariffs on US goods the US will charge an equal tariff on that country’s goods. This shows how dependent the established order is on current tariff practices of discriminating against the US. The US is merely promoting the concept of free and fair trade. The world likes the free part but not the fair part. For many decades Europe has had a 10% tariff on US auto imports while the US has a 2.5% tariff on auto imports from Europe. Trump is about to change that and here is the response from Europe. “I deeply regret the US decision to impose tariffs on European automotive exports,” von der Leyen said in a statement released late Wednesday evening. “Tariffs are taxes — bad for businesses [and] worse for consumers equally in the US and the European Union.” A much better approach would be for Europe to reduce their tariff to match those of the US at 2.5%. When both sides are charging the same, they can take the next step and remove the tariffs. In 2024 8 million cars were imported to the US mostly from Europe and Asia. In contrast 300,000 US cars were exported to Europe. Less than 1% of cars sold in Japan are US imports. This is just cars but almost all other products are similarly treated. That is why the world is upset.