The Buzz on Business for September 4^th, 2024 

On March 1^st, 2018, then President Trump stated, “We’re going to build our steel industry back and we’re going to build our aluminum industry back. We’ll be imposing tariffs on steel imports and tariffs on aluminum imports. And you’re going to see a lot of good things happen. You’re going to see expansions of the companies.” 

And there was, initially, an increase in sales, profits and headcount in these industries. For example, in response to the Trump announcement, US Steel reopened a blast furnace in Illinois. And there was an increase in employment in the industry as well. In 2017, before the imposition of the tariffs, the US steel industry employed 83,600. By 2018, the industry had added 2,300 workers and approximately 400 more in 2019. 

As we say repeatedly on this podcast, one more employed person is a really good thing. Two more is even better. 

But the steel and aluminum industries are not ends in themselves. Steel and aluminum are raw materials—they are inputs, they are costs, in the products of other industries. The auto industry, for example. 

It is difficult, if not impossible and foolish to attribute a particular economic effect as the sole result of a particular economic cause. But it is instructive to take a look at the financial results of Ford and GM in the immediate aftermath of the Trump protectionist policy. 

I want to preface these comments by reminding listeners that the auto industry was enmeshed in contentious contract negotiations with the United Auto Workers and the union struck General Motors in 2019 which lasted forty days and which likewise resulted in increased costs for the industry. 

But there is no doubt that the tariffs raised costs for automakers. GM reported over $1 billion in additional costs in 2019, resulting in lower profits and higher prices for consumers. Ford stated that the tariffs, by themselves, reduced profits by over $1 billion. 

GM closed five manufacturing plants. Ford closed or sold six. Both companies announced massive layoffs in 2019 and 2020. Ford fired 7,000 white collar workers. GM fired 8,000 and laid off 6,000 unionized factory workers.  

The steel and aluminum industries hired a few thousand new workers, and the US auto industry downsized by tens of thousands. And to add insult to injury, US Steel was forced into a merger with Nippon Steel of Japan in just the last year. Not much of a “build back” if you ask us.  

So, the goal of tariffs is to support US manufacturers and high-paying manufacturing jobs. So then what are we to say to all of the unemployed auto workers? And what about all the individuals and businesses who are paying more for their cars and trucks and who, therefore, don’t have money to save, invest or spend on other things, and to those whose jobs and businesses would have been supported by that foregone savings, investment and additional spending? 

There is no doubt that manufacturing in the US is in a long-term downtrend. And while it is important to point out in this context that unemployment is low, the stock market is close to an all-time high and that the economy, apart from a brief period during the pandemic, has been growing steadily, albeit slowly, for almost twenty straight years. 

There are several changes to government policy that would support US manufacturing, we will discuss some of them in the next installment of this series. But raising the price of steel by 25% and taxing US consumers is not among them. 

Stock Market Report 

Stocks gapped down at the open, on weaker than expected economic news, sold off, hard, all day long and closed at or near their lows of the day and all of it on expanding, above average volume. We’ve seen selloffs like this in recent weeks and in their aftermath, we here at the Buzz on Business have speculated that the selling might continue only to see stocks quickly rebound to new highs. We shall see. 

• The Dow Jones Industrials were off an astounding 626 points, over 1.50%, and they closed at 40,937. 

• The S&P 500 was off over 2.1%, 119 points, and they closed at 5,529. 

• The techs got the worst of it. The NASDAQ Composite was down over 3.25%. That’s 577 points and they finally settled at 17,136. 

• And the small caps were not immune from all the selling. The Russell 2000 was down 68 points and closed at 2,149, a loss of 3.10%. 

A rough day indeed for stocks. 

Bond Market Report 

Bonds rallied as rates fell, partially as a flight to safety and partially in reaction to the weak economic news. 

• The yield on the 2-year treasury was off 6 basis points and it now stands at 3.863% 

• The 20-year was down 10 ticks, and it closed at 4.205%. 

Oil, Gold, and Bitcoin 

• Oil had another bad day. It was off $3.24, and a barrel now changes hands at $70.29. That’s the lowest closing price we’ve seen for oil since Christmas! 

• Gold opened sharply lower but recovered a bit throughout the day to finish down $11.10 and a troy ounce will now set you back $2,523.60 

• And Bitcoin continued its struggles. It lost another $706.95 and at 4:00 PM ET stood at $58,052.54. 

Manufacturing Weakness Is Not News! 

Call us unconvinced with the narrative that claims that yesterday’s selloff was caused by weakness in the manufacturing numbers which were released before the opening bell. The numbers out of manufacturing have been disappointing for over two years now. The S&P Manufacturing Purchasing Managers’ Index came in at 47.9. Not great. Anything below 50 indicates contraction in the manufacturing sector. It came in at 47.9 but expectations were for a print of 48.0.  

The ISM (That’s the Institute for Supply Management) issues a similar number and it likewise disappointed but again, not by much. It was 47.2 versus expectations of 47.5 

I’m sorry. This isn’t news. We think the market was ready to go down and siezed upon any convenient excuse to do so. That doesn’t make the selloff any less painful or worrisome, of course, but explanations must be found elsewhere in out view. 

Today, we get the JOLTs Job Openings Report and Factory Orders, another look inside manufacturing. 

We will do what we do so all you’ve got to do is keep it right here on the Buzz.