The White House knew that tariffs were going to rock the economy, so they scheduled their announcement for after markets close. Prices plummeted in real time, and markets were roiled worldwide. The S&P ended the day down 5%. The NASDAQ was down 6%. The smaller business Russell 2000 was down 6.6%.
We could see a global recession and a 200 basis point hit to GDP. Job losses from the tariffs are estimated in the hundreds of thousands.
More global trade means economic growth. It means food is cheaper. Winter coats are cheaper. Incomes go up. Poorer countries impose tariffs, and free trade made America prosper. This administration doesn’t understand that. But even within their own paradigm, the effort just makes so little sense.
- The U.S. put higher tariffs on Israel than on Iran – even though Israel dropped all tariffs on U.S. goods. (Trump had previously said that countries which dropped their tariffs wouldn’t have them imposed.)
- Trump’s tariffs were ostensibly pegged to each country’s tariffs on U.S. goods, but it turns out they’re not. Instead, they nonsensically divided the U.S. trade deficit with a country by the country’s exports here.
- The U.S. runs trade surpluses with Australia, the U.K., Hong Kong and the Netherlands. Why are we imposing new higher tariffs there if the tariffs are supposed to be reciprocal? Singapore has no tariffs on U.S. goods at all.
- And if we are worried about China, we should be leaning into our relationship with Vietnam not pushing them away! Vietnam had announced a reduction in tariffs but wound up with one of the highest rates in the world.
So I was surprised by United Airlines CEO Scott Kirby’s remarks on Thursday in San Francisco that Trump’s tariffs represent a “genuine desire to create more careers” and that while “some may disagree with the way and tactics, but the goal I think is a laudable one.”
Does Scott Kirby have any conviction? Lower economic growth and less trade is certainly bad for the economy and for air travel. Kirby has made the case that airline revenue tracks very closely with GDP. But a global slowdown hurts United most of all, because United is most exposed to far-flung routes. United’s stock fell over 15% on the tariff news today.
Kirby was woke when woke was in. United got out ahead of vaccine mandates and leaned into climate change (and supported affirmative action in California) when that was pleasing to the Biden administration. Now, United donated $1 million to Trump’s inauguration. Kirby gets his advice from the airline’s Executive Vice President Josh Earnest, Obama’s former press secretary.
Captain Renault said to Major Strasser in Casablanca, “I have no conviction, if that’s what you mean. I blow with the wind, and the prevailing wind happens to be from Vichy.”
In earnings calls, Scott Kirby is candid – and willing to stake out bold claims. Agree or disagree, he’s anything but mealy-mouthed. When it comes to the things that truly matter, though, he seems to have no conviction – and the prevailing winds come from Mar-a-Lago.
Though I suppose he might think there’s little he can do, so he might as well position himself to ask for things from the administration at the margin. Our best hope for the economy may actually come from the Supreme Court, since the tariffs are probably illegal and certainly run afoul of the Court’s major questions doctrine which it leaned into during the Biden administration. The only problem is that this takes time and by then the damage may have already been done.
@patrick — I did find your analogy to be silly, but I presume that you meant well.
You (and others) should realize that in 2025, if we really wanted to, we (humans) could actually feed and house everyone who still needs it on Earth. Yes, all +8 billion of us. We have the ability, we choose not to. Maybe we should ask ‘why’ more often.
Personally, I think we should judge the society on how it’s most vulnerable are doing; not to look at the very top and see how high above they are from the rest of us. I guess I’m ‘the devil’ for thinking such things. (Ironically, if anyone actually bothered to follow the teachings, the message of many of world religions is to actually care for and build up the poor, not to punch them down.)
1990
since you are copiously responding….
UAL stock is down by far the most since this all started and is headed down even more based on futures. a huge international/small domestic network compared to other airlines is a liability.
Kirby is trying to protect UAL and Kirby himself. His strategy was a high risk potentially high reward strategy. Huge risks have opened up and UAL’s massive aircraft and terminal expansion and potentially much slower growth could derail UAL’s plans. Even if they start parking old planes and using all of their orders to take on new modern aircraft, their debt service levels will soar.
UA counted on one of ULCCs failing; NK has restructured in chapter 11 and that will be true w/ any other that goes that way, including AA or WN which has huge overlap with UA. There will be no huge gains by UA at the expense of anybody, esp. in the short term. UA will suffer far more pain during the transition than they will receive in gains.
Gary got his marching orders from the leftist media: Tariffs are bad for the economy, Trump is bad. Admittedly they are right that tariffs are bad for the economy. Just look at what we cannot sell some products overseas because another countries tariffs are so high it makes trade impossible. And yet here you are sobbing that trade will be harmed by the U.S. adding reciprocal tariffs to these countries. Our economy will survive just fine because at the end of the day, as has already begun, these countries are suddenly wanting to negotiate. It’s called levelling the playing field, not allowing the U.S. or it’s citizens to be the worlds piggy bank. It’s time the government stop treating taxpayers like some never ending money tree they can shake down when those clowns in Israel, Ukraine, or any other dumpster fire country needs a hand out and it’s about damn time we stop increasing everyone else wealth but our own..
@Tim Dunn — I was just comparing those figures as well, and I agree that you’ve been vindicated.
UAL at $60 down 15% (YTD -38%)
AAL at $9.5 down 10% (YTD -45%)
DAL at $38 down 10% (YTD -36%)
I doubt this gets better anytime soon. Probably much worse moving forward.
On ‘copiousness,’ it ‘takes one to know one,’ dear friend. At least, I am in good company.
more specifically, in this case, you, me and Gary at least are on the same page.
Even if this is the right direction, the path is so full of potholes and wounds and damage that no one will see it as worth it.
and the stock market losses between yesterday and today will end up about as the red team capt. says these tariffs will generate in revenue
even before job and company losses.
DL reports earnings first next week – as they usually do. Every airline CEO in the world and many economists and CEOs will be anxiously watching what DL says. I doubt if their guidance will bring much comfort
The fundamentals were actually decent. Never perfect, though the Fed did achieve its ‘soft-landing.’ Inflation was down to reasonable levels (partisans will disagree). Stocks may have been overpriced, but the American economy was the ‘envy of the world,’ following the pandemic.
Trade wars are just not like any of the other prior speculative ‘bubbles’–it’s not derivatives on real estate, or fads like fintech or the dot com era. No, His policies are self-sabotage to the global economy. His ‘insular’ approach is antithetical to everything that made America actually ‘great.’ And in that regard, travel as a sector is uniquely vulnerable. People are gonna just stay home.
So, on the market, these days, I’d rather be like the ‘Oracle of Omaha,’ relatively ‘out’ of it all; instead, sitting with a ‘war-chest’ of cash, waiting for the right moment to buy up the ‘survivors’ on-the-cheap. Then again, he’s 94 years old, so maybe ‘another round’ is simply too much to ask.
Anyway, I think it’s also safe to expect that bankruptcy and M&A are gonna be ‘hot,’ again, soon enough. As members of the ‘peanut gallery,’ this will be wild to watch unfold.
@1990 The “it’s business, not personal” might be an old saying coming from a movie about the mafia but it remains true. Any large corporation might ultimately need to be looked upon favorably by the government. A CEO understands what’s good for the company bottom line. I have no idea of what this guy’s personal beliefs are but if he needed something from the Trump Administration (or any Presidential administration) what you don’t want coming out of the President’s mouth in a closed door session is “isn’t he/she that asshole that bad mouthed me?”
@Mike R — You sure this isn’t ‘Mike P’? Because that guy would’ve said something similar (he hated our former allies, too). Thank you for at least admitting that these tariffs are ‘bad for the economy.’ I get it, ‘reality has a liberal bias.’ Gary threaded the needle delicately here. So, ‘sob’ if you wish.
@George N Romey — “Just doing business,” or whatever variety you wish, is a common phrase, regardless of its original source. I would agree that the way the President is operating is like a mafia boss, which is not a good thing, even if some feel as though He is protecting them, for now.
As far as Kirby’s attempts at appeasement, I understand it, but I don’t think it will be effective–consumers are going to ultimately reject this administration. Better to be principled than to waiver like some of these CEOs. You don’t defeat a bully by appeasing them. It’s fight or flight (pun intended). I agree with Gary’s analogy that it’s like Vichy France appeasing their occupiers. History will not be kind. Kirby and others could form coalitions (if he comes for one of us, he comes for all of us), but they probably won’t until it’s too late. What a shame that is. We know better.