U.S. Faces Agricultural Backlash Over Tariffs
Tariff Tussle Today: Daily Discussion on Import Duties
As Trump's tariffs against Canada and Mexico come into effect, both nations retaliate with their own tariffs, causing a stir in the global trade landscape.
- "Standing up for itself": The outgoing Canadian PM, Trudeau, announced duties of up to 25% on $30 billion worth of U.S. goods right off the bat. If that wasn't enough, an additional $125 billion worth of products will be hit with tariffs in three weeks.
- A hit to the agricultural heart: Agricultural products account for 1.2% of U.S. goods exported to China, and any tit-for-tat actions could make life harder for businesses on both sides. For example, China announced additional levies on agricultural products, putting pressure on related stocks such as Nutrien (NTR 1.44%) and Corteva (CTVA 2.10%).
Tariff Troubles & American Shoppers
Trump's 25% tariffs could see prices on energy, automobiles, and basic groceries rise for U.S. consumers, potentially impacting monetary policy actions from the Federal Reserve.
- Detroit's Big 3 feel the heat: Major car manufacturers, like General Motors (GM 2.61%), Ford (F 2.10%), and Stellantis (STLA 4.65%), saw a drop in their stocks yesterday, as they make up to 40% of North American cars and trucks in Canada and Mexico. According to CNBC, a 25% import tax would increase the cost of a vehicle by an average of $6,250.
- "Prep for a farming bonanza within the U.S.": Trump's comments about increased agricultural production within the U.S. led to a dip in farming stocks, as lower international demand could impact revenue. This could result in a noticeable increase in the price of imported fresh produce from Mexico with short shelf life cycles.
Sycamore Sets Sights on Walgreens
Private equity giant Sycamore Partners is rumored to be after Walgreen Boots Alliance (WBA -0.27%), following a 50% price drop over the past year.
- A history of troubles: The business has struggled in recent years with declining retail pharmacy performance, particularly as pandemic-related demand for vaccines and testing has reduced. It has underperformed in trying to implement a transformation strategy related to primary care clinics via VillageMD.
- Break-up or refinance? A takeover by Sycamore Partners could lead to a break-up of Walgreens, with a significant restructure seeing some divisions divested. Another option could be to refinance the extensive debt pile to alleviate some pressure on operating units.
On the Runway with On Holding
On Holding (ONON 0.15%) released its Q4 and full-year results, smashing expectations despite a 18% fall in the past month due to concerns around Nike's revival and tariff worries.
- Defying the odds: The business surpassed its latest outlook across all metrics, experiencing continued momentum from Q3 into the holiday season. A record-breaking gross profit margin of 62.1% was achieved thanks to significant direct-to-consumer expansion.
- A star performer: On Holding is currently ranked 8th among Stock Advisor's highest-conviction ideas after facing some operational problems in Q2. Shareholders were reassured by the outlook, which flagged up anticipated operational efficiency gains for the year ahead, preventing any significant supply chain or inventory management issues.
Under-the-Radar Invests
On is a little-known brand some hobbyists rave about. What other under-the-radar brands could inspire a smart investment? Discuss with pals or subscribe to hear what your fellow Fools have to say.
Enrichment Insights:
The tariffs on U.S. agricultural products from Canada and China pose significant challenges for U.S. farmers, including:
- Increased input costs due to tariffs on crucial imports like potash, which are vital for maintaining agricultural productivity.
- Reduced export opportunities as Canada retaliates with tariffs on U.S. agricultural exports, such as pork and other products.
- Supply chain disruptions, particularly for products like baby pigs, which are imported from Canada for U.S. pork production.
- A significant Chinese export market for U.S. agricultural goods, including soybeans, corn, and meat, could be severely impacted by retaliatory tariffs, leading to economic losses for U.S. farmers.
- The ongoing trade tensions with China could lead to a permanent loss of market share as China diversifies its suppliers, potentially causing lasting harm to U.S. agriculture.
- Tariffs are likely to increase food prices in the U.S. as import costs rise and are passed on to consumers.
- President Trump's encouragement of U.S. farmers to increase domestic production could face skepticism due to the reliance on international markets for financial stability.
- The USDA may need to allocate additional funds to support farmers affected by trade disruptions, as previous emergency funds are depleted.
- The tariffs on U.S. agricultural products could lead to a significant increase in input costs, as crucial imports like potash face tariffs, making it more expensive for farmers to maintain productivity.
- The retaliatory tariffs from Canada on U.S. agricultural exports, such as pork and other products, could diminish export opportunities for American farmers.
- The trade tensions could cause supply chain disruptions, particularly for products like baby pigs that are imported from Canada for U.S. pork production.
- The Chinese export market for U.S. agricultural goods, including soybeans, corn, and meat, is at risk of severe impact due to retaliatory tariffs, potentially leading to economic losses for U.S. farmers. These losses could be long-lasting as China diversifies its suppliers, reducing U.S. market share in agriculture.
