Dont worry too much. EU exports to US is 5% of the GDP
Some of it can be lost. Some of it might mean jobs relocation to US (like cars) . Some of it will not be replaceable and hence more cost for US consumers / payers.
5% cannot drive the rest of 95% forever. EU should buckle up, negotiate well, save manufacturing industry locally which is under stress and we will be fine.
I have to say itâs impressive , you are tripling down on US market (3x leverage) in current times
Is is really a sound strategy from risk mitigation perspective ?
Again, then why doesnât Trump raise VAT instead of tariffs? If your claim is that the VAT is unfair to the producer in countries with lower VAT.
Also, you are wrong. The company isnât âworse offâ. It competes on an even footing with domestic producers.
Also, the country isnât worse off either, because all of its producers are competing on an even footing with the producers of the lower VAT. The only argument to be had is that the government gets less taxes on foreign produced goods than foreign governments do on their countryâs produced goods. But that has nothing to do with competitiveness or unfairness. VAT in the end is on the consumer, not on the seller. Consumers of that foreign country. You and Trump fundamentally fail to understand this. Trump because he just cannot imagine that Europeans donât want American cars but Americans want European cars. This has nothing to with VAT or tariffs. But he thinks US BEST and stops there.
Iâm waiting for the tariffs to end after Trump claims some kind of victory. Iâm expecting the a massive rally at that point. Though to be fair, Iâve been waiting for that massive blow off top for years now and instead got stock prices steadily grinding up (if you can call annual 20%+ a steady grind).
We need a âpointless argument about VATâ thread.
Yes, in theory thatâs plausible, but however âmassiveâ, at this stage itâs more likely to go back to ATH. I think thereâs a lot more volatility to come the following months. Dead cat bounces etc. personally I feel the time of the next proper rally will be in the US midterms. And sadly regardless of whateverâs happening the democrats canât seem to find their way, meaning the message remains âweâre not Trumpâ.
We havenât yet seen the response from the EU, Asia and Mexico. Canada fought back smartly and impressively targeting red states.
Personally, I think the tariffs are just a gift for his super rich friends. Now that he eliminates foreign competition, they can easily increase their margin and therefore their gains.
BTW before panicking, just zoom out and see that we are still in total range of normal volatility.
It is indeed pointless and we move in circles. Again, we are not comparing two companies selling in the same country, we are comparing import export. And as I mentioned, from this viewpoint VAT is exactly the same as tariff. I gave examples and other people gave examples, just read.
The discussion is out-of-topic now because the confused arguments for the new tariffs did not even include VAT.
I think there are too many trade barriers already. Talking does not help, as Switzerland is trying for decades to get a trade treaty with the U.S. but without killing some holy cow (owners) benefits this will never happen. Other countries are even worse as my example from Spain shows. And instead of removing frontiers we are building new ones. This will bring hunger and poverty to the worldâŠ
The question remains at what point we should stop funding capital in US companies and support regional companies.
Or we shouldnât care about an attack on our countries . I am in splits because I still have 50% exposure to US stocks
This whole discussion makes me think about whatâs going on these days.
US admin is very good is using False fallacy.
They just bring an argument which has nothing to do with what is being discussed and then this new argument becomes the main thing
US has trade deficit -: true
USD is strong and impacts US exporters -: true
Is world ripping them off -: not true but becomes the main discussion
No one tries to explain why US has trade deficit and why USD is strong and in fact this is not such a bad thing for US so far because they were able to run trade deficit for years and grew their economy without ending up being a banana republic.
Lutnickâs argument is if US has trade deficit then itâs obvious that other countries are doing bad trade practices. If thatâs true then how come US has trade surplus on services? Are they going to pay back heavy credits to all countries who have trade deficit on services with US because apparently US is ripping them off. NO because people buy what they need to buy. Nobody rips off anyone by buying stuff.
US has trade deficit because US is a service economy. They buy goods from other countries and try to sell them services. Services have higher margins and goods have lower margins. So itâs beneficial for US to maintain trade surplus in service.
What can Vietnam buy from US in terms of goods ? Only oil or defence stuff. Everything else would be unaffordable.
Now we may wonder why so many countries have trade surplus with US? Well reality is that most countries need USD to buy things like crude oil, tech services etc. But the only way to get USD is to sell something to US. So even if they donât want to sell to US, they are kind of trapped due to Petrodollar treaty.
Hence if US doesnât make affordable things for other countries to buy or make crappy things that other countries donât want & most countries need to sell to US to get USD to live their life, what should they do? Some countries tried to move away from USD for oil trade. And they were attacked by US -: Iraq, Iran and of course now Venezuela. Anyone who becomes a threat to USD dominance is marked as âmonsterâ but at same point strong USD makes US exports more unaffordable.
You cannot be a richest country in world and also be exporter of manufactured goods to the rest of the world. Warren Buffet is not making suits, he is buying suits.
And lastly after months of analysis, US admins came up with the greek letters based formula to define effective tariff rate to compensate âtrade barriersâ and this formula is essentially trade deficit ratio to imports which had nothing to with tariffs imposed on US goods.
What does it tell us about the competence of people working on worldâs most important policies which are changing the economy globally? And what does it mean for our investments
Itâs simply shocking
If you mean that VAT is like a tariff because you have to pay money to sell product in the country, then yes it is true. But then postage costs is also like a tariff by this argument.
I think the key objection to tariffs is that it distorts competition by deliberate penalizing foreign companies versus domestic ones. In this sense, VAT is not like a tariff.
I think you guys are talking past each other since you talk about different aspects of VAT.
I think youâre dead right here.
Now, in terms of investing, where does that leave us?
But it isnât. A tariff disadvantages a foreign producer versus domestic producers. VAT does not.
They are absolutely not the same. How can you still pretend otherwise? I have already acknowledged that yes, a VAT raises the final price as a tariff does. But thatâs where the similarities end. Except it seems that is where your comparison with VAT seems to end.
Itâs like saying an apple and an orange are both fruits. Theyâre the same thing.
My thinking is following. We have two elements to consider (Return & Risk)
Over a long term all well diversified portfolios of equities should have similar returns assuming efficient markets. So in reality it doesnât matter much if I have 35% US stocks exposure or 65% for my eventual returns. As even Ben Felix says for his own portfolio he has 1/3 Canada, 1/3 US and 1/3 Rest of world
But for the Risk element, US is becoming too risky to have such a high exposure (62%) while using global market weighted ETFs. The challenge is if I decide to underweight US, I need to overweight someone else. So far I have tried to do this by overweighting CH & IN and hence my effective US exposure is 50%. But I still think itâs too much and I am thinking what to do. Maybe I will overweight Europe.
Itâs just a bit more complex because most ETFs are designed to have market weights for US and hence if one were to deviate, we need to use 3-5 ETFs to achieve that. In addition, I also donât think itâs wise to sell existing US assets because they already dropped a lot in value and I should let them be. So my focus is to use future contributions to achieve rebalancing rather than selling existing assets.
I have to say 50% US doesnât make me feel comfortable given the current situation
I think my English is getting really bad, again you compare the sale in the same country. And there of course you are right. But from the viewpoint of import export both companies sell vice versa and there VAT is like a tariff. I feel like this argument has popped up a dozen times and I did answer it a dozen times. There were at least 3 examples that explained it.
When i âsoldâ my Swiss bought bike in Spain I couldnât go through because of the costs. There was a tariff, reasonable size. There was some import tax for vehicles, reasonable too, I still would have made money and saved a few days riding back. But then there was VAT, about 200-300% of the value. The reason for that high tax was the valuation they did put on the bike. But anyhow, for me all three are the same, I still need to make a profit and couldnât. Trading barrier, frontier closed.
Can we leave it at that? Getting tired and it is no longer on-topicâŠ
Thanks for sharing your thoughts. Iâm in the same boat. I will keep my current US allocation but invest âsomewhere elseâ to balance it. The issue here is that the market is at risk because of irrational (to me, at least) decisions, and Iâm very worried of what is coming next
A post was merged into an existing topic: Benchmarking The Market
Personally, I have 30+ years before retirement, so Iâm not changing my allocations based on current market performance.
That being said, the recent US animosity has sparked a bit of European patriotism in me, so Iâm going 80% World, 20% Europe instead of 100% World. But thatâs more of a political move than a financial one.
If I didnât care about that, Iâd stick with 100% World and just chill. I canât predict the market, and trying to do so would only stress me out.
Time for the dead cat bounce?
