I’m going to count to three, China.
By that time, you’d better have bought more soybeans and natural gas.
This is China’s ‘last chance’, says Donald.
If they want to avoid more tariffs in the weeks to come, they better get serious on trade.
And until that happens Trump is happy to sit back and collect tariff revenues.
‘I love tariffs, but I also love them to negotiate,’ the President said.
A new bargaining chip, according to the Australian Financial Review (AFR), might be auto tariffs. This was something Trump promised not to do.
Not only would it hurt China, but also Japan and Germany.
Luckily, we Aussies got out of that bag not that long ago.
Most believe Trump will hold off on any such tariffs. If he doesn’t, countries like Germany and Japan might immediately retaliate.
You can never be sure with the Donald. He might end up taxing auto imports regardless of the implications.
It will be a big loss for auto manufacturers in China, Japan and Germany. Yet it might not be all that bad for businesses here in Oz…
Boon for Aussie manufacturers?
American businesses who’ve just set up in China must feel pretty hard done by.
They moved to China for the cheap labour. What they got in return was an uncertain escalating situation, which could affect operations for years to come.
From the AFR:
‘US businesses that manufacture goods in China but sell to US customers have been caught in the cross-fire due to tariffs that are applied when the goods are returned to US shores. With fewer US businesses outsourcing production to China, Australian companies may have a stronger footing when contracting for production with Chinese manufacturers.’
This is what Aussie-listed GWA Group Ltd [ASX:GWA] thinks anyway.
The company imports supplies for bathrooms, kitchens and alike. They used to manufacture most of this stuff themselves. But now with trade and globalisation driving down costs, GWA has had to go the import route.
About 70% of their imports come from China. And with US businesses looking elsewhere for manufacturing, it gives GWA the opportunity to expand. That’s how GWA boss, Tim Salt paints the picture anyway.
‘China-US relationship challenges have put a lot of pressure on American companies to diversify out of China to other parts of Asia for their supply sourcing,’ Salt said.
This was ‘because they’re concerned about tariffs going on their own products…It’s got the potential to open up opportunities for us in China as some of those American companies move out of there.’
But is this the kind of company you want to invest in as Trump layers on tariffs?
I don’t think so.
After all, the future is not manufacturing, much like it wasn’t farming.
Our future will be built atop of services. And that’s exactly where you should look for your next investment.
An opportunity few are talking about
We had a Money Morning reader write in the other day. And he was not happy…
He was annoyed that I trashed the NBN project. You can read that one here.
Not only that, he thought I was shaming Labor to pump up the Libs. That was not my intention of course.
Red, blue, I think both sides are terrible.
Watch any Aussie pollie ever. All they do is talk about how the other side is wrong, offering no concrete solution.
Or how about question time on ABC. Such a spectacle can only be seen in the primary school yard.
My aim was not to point out that Labor suck, but the Libs don’t. It is the Libs who continue to funnel money into this failed NBN project.
What’s more, they’re trying to save costs by making it a mixed (copper wire and fibre cable) inferior network.
They’re both terrible, I say.
But can’t we call a spade a spade?
The NBN project is a failure.
More recently, Telstra Corporation Ltd [ASX:TLS] boss, Andy Penn said the NBN is a zero-margin business.
It’s not close to being fully rolled out yet. But when it is, ‘our margins effectively on that business line will be zero,’ Penn said.
‘And the closer we get to that, I think we will have to think about increasing prices for customers.’
NBN boss Stephen Rue thinks that’s bollocks!
He says the mixed network can be upgraded to a fully fibre optic one after roll out.
The wholesale price of NBN, Rue also said, isn’t that high. Yet that completely conflicts with what Penn is saying.
If wholesale prices aren’t so high (the price Telstra pays to the NBN Co), why is it close to a zero-margin business for Telstra?
NBN prices for people like you and me are already 60 bucks and above. And with this we get about 10–42 megabytes per second (Mbps).
Over in Singapore, a plan for speeds of one gigabyte (1,000 Mb) per second will only set you back $42.
I think it’s pretty clear what needs to happen.
It’s up to the private sector to fix the problem. And this, dear reader, is your service investment opportunity.
Have a look at the fibre optic service providers on the ASX. They will be the ones to provide Aussies with faster fixed-line speeds. Not the government.
Editor, Money Morning
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