Goldman Sachs on Import Tariffs, Gary Cohn, and Jobs Report

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Part 2
Goldman Sachs on Import Tariffs, Gary Cohn, and Jobs Report PART 2 OF 5

Goldman Sachs: How Tariff Could Impact Businesses

Import tariff on steel and aluminum   

On Thursday, March 1, 2018, President Trump announced that the US will impose a 25% import tariff on steel and a 10% import tariff on aluminum very soon.

Goldman Sachs: How Tariff Could Impact Businesses

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After the announcement, the SPDR S&P 500 ETF (SPY), the SPDR Dow Jones Industrial Average ETF (DIA), and the PowerShares QQQ ETF (QQQ) fell 1.3%, 1.7%, and 1.3%, respectively, on that day.

Although the implementation of the import tariff will likely benefit the US domestic steel and aluminum market, many market participants expect that the implementation of import duties may prompt some of the US’s other trading partners to implement a retaliation tax on US exports, which might result in a trade war. Billionaire investor Ray Dalio recently said that a US-China trade war would be devastating.

David Kostin’s view on the import tariff

Goldman Sachs’s David Kostin believes this import tariff will hurt some companies’ margins. Many machinery stocks will face higher input costs. US steel producers, whose major source of revenue comes from US markets, will benefit the most from this import tariff. However, US manufacturers and major machinery companies who depend on US steel producers may face some issues, as their input costs will rise.

Kostin also said that if the US’s major trading partners impose a retaliation tax, then it would be a big risk for the market as well as for the global economy. He also pointed out that major industrial stocks such as 3M Company (MMM) and Boeing Company (BA) have the highest non-US sales. Major portions of their revenue come from outside the US. These two companies may be badly affected. On March 1, 2018, these two stocks fell 1.8% and 3.4%, respectively.

In the next part of this series, we’ll analyze Goldman Sachs’s view on US equity.


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