by Louis Navellier
May 13, 2025
While the Fed and some nervous investors fear inflation from temporarily high tariffs, the truth of the matter is that after a 41.3% surge in imports in the first quarter, all the imported goods “dumped” in America must be discounted in order to clear our shelves and warehouses of this bloated inventory.
China has fought deflation for years. In addressing its chronic deflation, the People’s Bank of China on Wednesday said it would cut its interest rates and inject more liquidity into the financial system. At a news conference by top Chinese policy makers, they proposed a “policy package to stabilize the market.” The People’s Bank of China has already cut rates several times and is essentially the “new Japan,” with ultra-low interest rates, and rumblings of a possible currency devaluation which will also weaken the Chinese yuan.
Tariffs are coming down. A new trade deal with Britain was announced by President Trump on Thursday with only the baseline 10% tariff staying in place. On Truth Social, President Trump said, “The agreement with the United Kingdom is a full and comprehensive one that will cement the relationship between the United States and the United Kingdom for many years to come.” In a second post, Trump said, “Because of our long-time history and allegiance together, it is a great honor to have the United Kingdom as our FIRST announcement. Many other deals, which are in serious stages of negotiation, to follow!”
This Britain/U.S. trade deal is also meant to put pressure on the European Union (EU), which has higher trade barriers. The U.S. actually runs a trade surplus with Britain, while the U.S. has a big trade deficit with the EU, so the Trump Administration is striving for the EU to onshore more production in the U.S., as well as lowering its tariffs. I should add that Brussels is being difficult, as the EU is threating more retaliatory tariffs on U.S. goods if trade negotiations break down. Overall, President Trump remains very bullish on his tariff strategy and said before the media in the Oval Office, “You better buy stock now!!”
Bloomberg reported that the biggest importer of foreign-made vehicles into the U.S. is General Motors, a U.S. firm, followed by Toyota and Hyundai. GM imported 1.23 million vehicles in 2024, according to Global Data, including nearly 55,000 vehicles imported from China, now subject to a 145% tariff. The Chevy Trax and Buick Envista SUVs are made in South Korea and are subject to a 25% tariff. Stellantis imports about 44% of its vehicles sold in the U.S., while Ford imports about 21% of its U.S. vehicles.
The irony is that most reciprocal tariffs are not expected to be enacted, since most countries will lower their respective trade barriers and promise to buy U.S. goods. The primary reciprocal tariffs are against China, which recently exempted 131 U.S. goods from tariffs, accounting for approximately $40 billion in trade, so the good news is that there is apparently a “thaw” developing in the trade dispute with China.
In the meantime, Treasury Secretary Scott Bessent just met with China’s trade negotiators in Switzerland, with no announcements yet, as we go to press. On Truth Social on Friday, President Trump said an “80% Tariff on China seems right! Up to Scott B.” That seems a bit high, but that’s his usual negotiating tactic.
Last Tuesday, the Commerce Department announced that the March trade deficit rose 14.5% to $140.5 billion, which was substantially higher than the economists’ consensus estimate of $136 million. So far this year, the trade deficit has doubled compared to the first quarter of 2024, even with a 23.3% increase in exports, so the dumping of goods to beat tariffs persists. In March, imports rose 4.4% to $419 billion, while exports increased only slightly, by 0.2%, to $278.5 billion. Due to the larger than expected March trade deficit, first-quarter GDP will likely need to be revised lower, but this may just be a one-time event.
China’s exports to the U.S. plunged 21% in April, while their imports of U.S. goods declined 14%. This essentially means that record-high tariffs are hurting China more than the U.S. However, exports from Malaysia, Thailand, Taiwan and Vietnam all hit records in March due to the dumping of goods to beat tariffs. Since China was diverting assembly plants to Vietnam and other countries in Southeast Asia, imports from Southeast Asia are also expected to plummet. The head of container ship company Maersk said that container ship traffic between China and the U.S. has dropped “30% to 40% in both directions.”
It also looks like semiconductor stocks like Nvidia are poised to resurge based on reports that the Trump Administration will be removing the country AI chip restriction imposed by the Biden Administration. Hopefully, the removal of these trade barriers will boost AI and data center-related stocks.
In other market news, Warren Buffett, who turns 95 this August, announced that he will retire as head of Berkshire Hathaway, which is now dominated by its reinsurance business. Due to the horrible fires in Los Angeles in January, Berkshire Hathaway’s earnings declined due to high claims. The private businesses that Berkshire Hathaway owns, like Borsheims (jewelry), Nebraska Furniture Mart, See’s Candies, as well as a real estate business, may seem a bit inflated, but these private business are commanding a “Buffett valuation premium,” so it will be interesting to see if Berkshire Hathaway’s valuation may suffer long-term from Warren Buffet’s well deserved retirement, but near-term, the ongoing decline in market interest rates should help Berkshire Hathaway, since insurance companies have massive bond portfolios.
The Institute of Supply Management’s (ISM) non-manufacturing (service) index rose to 51.6 in April, up from 50.8 in March. I was encouraged that the new order component rose to 52.3 in April, up from 50.4 in March. However, the business activity component slowed to 53.7 in April, down from 55.9 in March. Eleven of the 17 industries surveyed report growth in April, down from 14 that expanded in March. Overall, the ISM service index was better than economists expected, despite some confusing details.
In closing, I was at Mar-a-Lago a week ago and actor Jon Voight was seated at the table next to us. As one of President Trump’s Special Ambassadors to Hollywood, he has said in public that he favors the President’s proposed 100% tariff on foreign films. Specifically, on Truth Social, President Trump said that he has authorized the Department of Commerce and the Office of the U.S. Trade Representative to slap a 100% tariff “on any and all Movies coming into our Country that are produced in Foreign Lands.”
President Trump elaborated that, “The Movie Industry in America is DYING a very fast death,” and said that other countries “are offering all sorts of incentives to draw filmmakers and studios away from the U.S.” He then concluded by saying, “This is a concerted effort by other nations and, therefore, a National Security threat. It is, in addition to everything else, messaging and propaganda!” The proposed 100% tariff on films is expected to hurt Netflix as well as Canada, where a lot of films are made.
The President certainly wants to keep us on our feet with his many moves in many industry sectors.
Navellier & Associates: own Nvidia Corp (NVDA), in managed accounts. We do not own Toyota Motors (TM), General Motors (GM), Stellantis (STLA), Berkshire Hathaway (BRK-A& B), Netflix (NFLX), or Ford Motor Co. (F). Louis Navellier and his family own Nvidia Corp (NVDA), via a Navellier managed account, and in a personal account. He does not own Toyota Motors (TM), General Motors (GM), Stellantis (STLA), Berkshire Hathaway (BRK-A& B), Netflix (NFLX), or Ford Motor Co. (F) personally.
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
Imports “Dumped” in America Cause Price Cuts, Not Inflation
Income Mail by Bryan Perry
It’s Time to Invest in the U.S. Power Grid’s Inevitable Growth
Growth Mail by Gary Alexander
Inflation is up 10-Fold Since LBJ Debased Our Coinage in 1965
Global Mail by Ivan Martchev
My Take on the Best-Case Market Scenario
Sector Spotlight by Jason Bodner
Don’t Let the World’s Greatest Entertainer Derail You
View Full Archive
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Louis Navellier
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