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First, Canadian lumber, then steel and aluminum, and now Qualcomm (NASDAQ: QCOM).
First, Canadian lumber was slapped with a 21% import tariff. Then it was imported steel’s and aluminum’s turn. The first was slapped with a 25% tariff, the second with a 10% tariff.
And now, Qualcomm is prohibited from being acquired by Broadcom (NASDAQ: AVGO). Qualcomm shareholders are unable to vote on the matters, as they should.
It’s all due to the handiwork of our president. Donald Trump instigated the lumber tariff. He instigated the steel and aluminum tariffs. He instigated the Qualcomm block.
The Canadian lumber tariff was a straightforward act of crony capitalism: Help the thousands of U.S. producers of lumber. Let the millions of U.S. citizens who produce lumber-infused goods and the U.S. consumers of those goods pay the price.
Trump was more circular in defending the steel and aluminum tariffs. These Trump tariffs were every bit the act of crony capitalism as the lumber tariffs. This go-around Trump gussied up cronyism with the deference to “national security.”
Trump Tariffs: Security Risk?
Without home-made steel and aluminum, security is at risk, so reasons Trump. Never mind that the United States has engaged in combat in the Middle East for nearly two decades. Tariff-free imported steel has hardly impeded our efforts.
Nevertheless, steel and aluminum tariffs would compromise U.S. national security, so we’re told. So, tariffs we get.
Trump tariffs on steel and aluminum would also stick it to our steel-exporting enemies. This invites the question: Who are our steel-producing enemies?
If you answered Canada (which has already been hosed on lumber tariffs), the European Union, Brazil, Korea, or Mexico, move to the front of the line. These regions are the top steel exporters to the United States. These five regions account for 63% of U.S. imported steel (by metric ton), according to Commerce Department data.
I can sense the dismissive hand wave. What about the real enemies?
You refer to China and Russia, our second and 30th largest trading partners? China accounts for just over 2.2% U.S. steel imports. Imports of Russian steel account for 8%, according to the same Commerce Department data.
That’s all macro stuff, of course. Yes, we’re nickeled and dimed in the name of crony capitalism and national security. So what? We’re all nickeled and dimed together. It’s equal opportunity misery. The same soothing logic pacified Russians during the communist era.
Trump negating Broadcom’s attempt to acquire Qualcomm is a different matter, though. It’s micro stuff. You can feel it. It’s visceral. It’s also galling and appalling on a personal level.
First, Trump tramples property rights. He insults your intelligence while doing so. Trump applies the same lame “national security” objection to the micro that he does to the macro.
Qualcomm is known for inventing 2G and 3G wireless network technology. It invests in 5G research. Because Qualcomm helped create technology the government co-opted, it no longer owns its technology.
Think of the precedent: You invent something, and the government adopts your technology. Because the government adopts your technology, you lose your property right to your technology. With that precedent, better to remain squatted in a mud hut than to move on.
So, where should we slot Donald Trump on matters of economy and business?
Imperious Megalomaniac
If I were to apply a simple binary categorization, the choices would be either imperious megalomaniac or Gladys Kravitz (the busybody neighbor in the 1960s sitcom Bewitched).
Trump is Gladys Kravitz, to be sure, in that he can’t help but stick his nose in other people’s business. If only he could be constrained to a Gladys Kravitz, annoyance would be the only externality.
Unfortunately, Trump’s the imperious megalomaniac, as are all U.S. presidents, who suffer zero consequences for their actions. Not only can he stick his nose in other people’s business, he can wreak real havoc.
The Trump tariffs were revolting enough. We all pay a penny more for a can of soup and $200 more for an automobile. Trump has wreaked havoc on Qualcomm’s share price.
If you’re not a Qualcomm shareholder, why care?
Precedent once again. The first time is the hardest time. Two, three, four, and thereafter flow successively easier.
Once imperiousness is established in matters micro, you can be sure it won’t remain constrained to a singular micro matter. Qualcomm was hard, everything thereafter will be easier. Just ask our tariff-hounded neighbors to the north.