New Energy Weekly – America Spoke
Election day came and went. Americans voted to change paths
We are beginning to get a feel for what the new administration will look like now. And it will require a massive change in our investment focus.
The most critical factor for all investors will be tariffs. The incoming administration campaigned on 20% tariffs on all imports and 60% tariffs on Chinese goods. Let’s be clear, tariffs are taxes. And they will impact consumers – not companies.
The latest news is that the incoming Congress may legislate these taxes, making them difficult to remove. That’s a huge concern because it will cause a trade war. Other countries will place tariffs on U.S. goods in retaliation.
That’s bad, according to the Peterson Institute for Internal Economics,
Assuming other governments respond in kind, Trump’s 10 percentage point increase results in US real GDP that is 0.9 percent lower than otherwise by 2026, and US inflation rises 1.3 percentage points above baseline in 2025.
If China retaliates, Trump’s 60 percentage point hike leads to US real GDP falling more than 0.2 percent below baseline by 2026, and US inflation climbs 0.7 percentage points above baseline in 2025.
The US effects vary by sector, with durable manufacturing taking the biggest hits—the opposite of Trump’s stated goals.
The 10 percentage point added tariffs damage the economies of Canada, China, Germany, Japan, and Mexico—all major US trading partners that see lower GDP relative to their baselines through 2040. Mexico and Canada take much bigger GDP hits than the United States.
The impact on our allies and neighbors’ economies will damage our trading relationship with those countries going forward. And unfortunately, many of the largest public companies will be caught up in that issue. Technology, automotive, and retail sectors could see deep bear markets in the next few years.
At the very least, we expect extreme volatility as these policies roll out and the market gauges the long-term impacts.
With that in mind, Mangrove Investor will look quite different in 2025. We plan to fold our large-cap, U.S. focused Spotlight letter. We believe that the best thing we can do is go to cash while this plays out.
Cash in the bank protects us from unexpected stock price falls due to volatility. And it gives us the ability to act quickly on opportunities that may arise.
Additionally, our New Energy service will be much more cautious in its approach as we watch to see what new policies are enacted. We are particularly concerned about rollbacks on electric vehicle tax credits and manufacturing stimulus.
It’s going to be a bumpy 2025! But that should also give us some opportunities.
For the Good,
The Mangrove Investor Team:
