Latest / UBS Trending / Will tariffs reshape the US economy?

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Will tariffs reshape the US economy? · UBS Trending

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  While headlines focus on tariffs and trade tensions,
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  there's another aspect to this story reshoring.
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  U.S.
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  companies are now looking even more resolutely
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  to rebuild on American soil.
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  Today, we'll explore how this reshoring revolution
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  could reshape portfolios and potentially redefine America's
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  economic future.
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  We're going to get into the details right here on UBS.
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  Trending.
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  Hi again, everyone, and thank you for joining me.
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  I'm Anthony Pastore and this is UBS Trending.
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  My guests in the studio
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  with me is Maurits Pots founder and CEO of Tema ETFs.
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  More. It's good to have you back in the studio.
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  Anthony thanks for having me on the show today. Yeah. Thank you.
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  I and I read your recent report on tariffs and reshoring.
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  Boy, the timing of getting you in here
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  couldn't have been any better.
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  We're, you know, where we're sitting right now.
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  The markets are very volatile.
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  There's a lot of uncertainty around the tariffs
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  because they go on, they come off, there's new dates.
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  So we won't get into the specifics
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  because it can change at a moment's notice.
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  But I thought maybe I could just sort of say to you
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  to kick off this conversation and the research you're doing,
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  the reshoring aspect is really interesting,
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  bringing us manufacturing production back here on American soil.
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  How have the tariffs and the reshoring
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  connections and discussions been going?
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  Well, it's a very good question, and it's a very timely question.
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  And what we see is underlying Trump's tariff
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  agenda is a focus on Made in America, America First.
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  And at the heart of that, that means bringing jobs,
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  manufacturing innovation, investment back to American soil,
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  not to our neighbors in the North or our neighbors in the South,
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  but back to the US. Right.
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  And what that really leads to is a acceleration
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  in reshoring announcements, reshoring activity
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  and frankly, reshoring prospects.
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  And we've really seen that just in the number of job
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  announcements over the past year already,
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  just as the step up is, is immense.
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  Now, this is not something that just started last quarter.
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  This has been going on for a number of years.
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  We see reshoring under the guise of a bigger trend
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  also known as D globalization, where we see
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  growing fracture ization between countries,
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  which makes trade more expensive, which makes trade more complex
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  and frankly, is leading companies to say
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  it may be more expensive to produce at home today,
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  but it's more secure.
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  And ultimately I have less and less uncertainty.
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  I'd rather take that de-risk my supply chain,
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  even if it comes at a slightly higher financial cost.
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  I think many of us can remember that during the pandemic
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  and the really the heart of the pandemic,
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  the supply chain issues were really prevalent.
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  I mean, that's why the shelves in so many grocery stores
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  for everyday consumer goods were empty.
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  These tankers were stuck offshore.
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  Obviously, that would not be an issue if we were creating
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  most of our goods and services here in the, in the United States.
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  So give us an example then of where you see
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  potential reshoring opportunities.
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  In the US.
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  We were just talking about
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  things like semiconductors,
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  where outside the US is
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  where most of them are made very few here,
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  but it seems like there's momentum kind of building.
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  So we see reshoring expanding to a wider array of industries.
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  But clearly the administration is focused on
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  some of the more strategic and sensitive and sensitive industries
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  for us.
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  And one of those include semiconductors.
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  TSMC already opened a massive $40 billion plant
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  in Arizona last year, which again was after 2 or 3 years of work.
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  These are big commitments.
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  You don't turn on a big reshoring project overnight.
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  You're making commitments for decades,
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  which ultimately take a number of years to bring online.
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  So we've started to see it in in areas like base
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  manufacturing, advanced manufacturing, defense manufacturing.
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  We're starting to see it in pharmaceuticals.
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  We're starting to see it in parts of just consumer.
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  So I think in general, what we're seeing
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  is that the number of industries
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  where reshoring is playing a role is growing.
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  Under Trump, reshoring is a mandate.
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  Under Biden, it was a choice.
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  And as it now moves from being an option to being a mandate,
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  companies are getting on the front foot about reshoring
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  in terms of their announcements,
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  in terms of the capital requirements and also the speed
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  with which are looking to onshore production.
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  And we've seen several major announcements in the last month
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  alone of companies announcing big multi-year products.
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  So if you look, for example, the Apple factory announcement,
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  which happened two weeks ago, that's a big, big commitment.
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  It's multiyear. It's big dollars.
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  And frankly, that's a real commitment.
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  We're going to move production
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  away from China, even away from India.
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  Back to us. Yeah.
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  With the question.
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  I think that comes up for a lot of folks in.
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  We're learning more and more about tariffs, about how it impacts
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  not only the country that's
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  exporting their goods,
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  but also the consumer that's paying on the other end.
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  What about the long and, you know, so I would say short and long
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  term impacts of tariffs and then reshoring
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  because obviously labor here
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  is going to be a little bit more expensive than overseas.
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  So how does that play into
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  how you think about the long term impacts.
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  So I think undeniably
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  when you relocate supply chains that leads to volatility
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  and uncertainty,
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  which will have
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  short term economic impacts, which could be somewhat,
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  you know, concerning or potentially somewhat volatile.
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  But if we look beyond the initial short term,
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  I think by the mid term companies will have much better
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  visibility and security over their supply chains.
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  And also as we see
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  inflation pick up, which is inevitable in the short term.
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  We actually think that some of the cost differences
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  across arbitrage is why people offshored 20 years ago
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  are only going to narrow.
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  So as supply chain security goes up,
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  financial arbitrage goes down.
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  I think it becomes a much clearer, a much easier choice.
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  But undeniably there will be, volatility
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  and friction in that transition phase.
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  And I think it's inevitable
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  that the government will see inflation pick up at some point
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  in the near future in response to some of these tariff announces.
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  But those actual tariffs coming in. Yeah.
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  You know,
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  we've got an interesting chart
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  that you provided for us
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  talking about that when China, entered the World
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  Trade Organization in the late 90s,
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  you did see industrial production
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  kind of stall out a little bit here in the US,
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  and I could imagine that that's where a lot of this research
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  that you are doing
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  at Tema with your team is coming from when you look at the impact
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  of what happens when we're not maybe
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  getting so many goods from China,
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  we're getting them more from here. Correct.
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  So we spend a lot of time
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  really looking at the implications of reshoring the,
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  you know, signs of reshoring, but also like how reshoring
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  is manifesting
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  itself across
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  different supply chains, different industries in different ways.
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  And I think tariffs is one of the latest catalysts
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  or one of the latest accelerants,
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  but it's by no means the only catalyst or accelerant.
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  This trend has been going on for a number of years.
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  And that we've seen this chart
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  is that there was a period of time when, frankly,
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  the industrial complex in the US was under invested in,
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  and productivity and output, frankly, didn't accelerate.
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  But I think we now are seeing in a year a rapid acceleration
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  in both investments inputs, but also outputs productivity.
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  Right.
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  And we think that's going to accelerate and continue.
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  And again, this is really under
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  the guise of this is a focus on made in America America.
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  First let's protect ourselves protect our consumers,
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  protect our supply chains.
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  And we're looking even at these.
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  You mentioned some of them, these mega project announcements
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  that in the first quarter of 2023,
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  you were looking at about a $600 billion price tag.
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  It's all the way from fourth quarter of last year, $1.7 billion.
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  It's a it's a huge increase.
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  And I'm imagining that number is just going to keep going higher.
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  Yeah.
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  So we kind of see it accelerating.
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  Just in the first quarter of this year.
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  And I think you see a number of companies that realize, you know,
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  they're not going to second
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  guess what tariffs will come for how long or what race.
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  There's a listen.
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  We're going to make a commitment back
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  to us irrespective of what happens in tariffs.
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  Because I think two rounds
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  is that what we know is tariffs will come.
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  We don't know is with what speed, with what size
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  and how there will be applied relatively between countries.
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  I think it's clear that some countries
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  that are in the early phases of this policy have had
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  more of a focus in the tariff policy,
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  but we wouldn't
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  be surprised to see
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  tariffs brought into more industries
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  and more countries in the coming months.
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  What a it's a very compelling story.
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  So just to wrap it up with you more,
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  you mentioned Made in America right at the top of the show.
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  How does that sync up with reshoring and tariffs.
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  Yeah, I mean Made in
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  America is really focusing
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  on, you know, investing and producing and manufacturing locally.
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  And ultimately reshoring is one of the biggest drivers
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  will bring back manufacturing to Made in America.
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  Right. And globalization as you see globalization.
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  So globalization I think thinks about the risks associated
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  with your manufacturing outside of your home country.
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  I think made in America is incentives that are provided
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  by the government or privatization
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  to bring manufacturing back home.
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  And I think we've seen some acts in the past few years
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  that came and went.
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  But it's interesting,
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  some of the acts that are now currently under review,
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  the majority, the money's actually already been spent.
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  And ironically, the Chips acts as an example.
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  The majority of money was actually spent in red states.
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  So we are not worried about
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  whether the Chips act could or may not be repealed.
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  We think there will be an act that follows,
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  even if it's a slightly different act.
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  What's clear is that the government is very strategic,
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  but also is very focused on enabling
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  companies and investors to come back to this country.
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  Right.
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  As you said, the the short term impacts are there.
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  There will be some volatility
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  and a lot of the uncertainty that the market really doesn't like.
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  But hopefully
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  in the long term,
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  we'll start to see the benefits of what's happening.
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  And then things might try and calm down a little bit.
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  I think people are accepting short term volatility for midterm.
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  Security, right. Actually.
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  And I think that's the kind of trade off that people are.
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  The government is accepting.
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  And I think the government is pressuring companies
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  to accept those. Sure. Exactly.
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  We also have a we have a terrific Made in America report
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  that our chief investment office has done a lot of research on.
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  I'm sure it probably matches a lot of what you and your team
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  have also seen in, in your digging through some of the numbers
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  and the strategies and the research that goes along with
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  with that program. Yeah.
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  So we released a report last month about tariffs and reshoring,
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  and we're actually
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  releasing a report this week about powering Made in America.
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  So what are the resources?
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  What are the policies
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  required to really enable
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  the Made in America focus from the current government? Excellent.
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  So yeah, we really focus a lot of bottom up research
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  and research in the field with experts, including our own team.
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  Terrific. More so thank you so much.
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  Great discussion. Very timely.
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  Lots to look forward to over the next couple of months
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  into the next year or so.
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  Glad you could drop by. Good to see you.
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  Thanks for joining me. Of course. Maurits Pots again.
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  He is the founder and CEO of Tema ETFs, a terrific partner
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  for all of us here at UBS.
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  And there's lots more information on our website,
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  including everything that Maurits tonight discussed and more.
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  Visit our website ubs.com/views.
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  Plus you can follow us on social media.
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  We're on LinkedIn, Facebook and Instagram.
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  You can check out our studio's channel at UBS trending.
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  It's right there on your screen.
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  So please give us a follow there.
• 10:59
  And as always, if you have any questions about your portfolio
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  or would like to access
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  any of the reports that we spoke about today,
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  make sure you're chatting with your financial advisor.
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  Until next time, I'm Anthony Pastore.
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  We wish you a great rest of your day,
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  and remember to keep your eyes on what's trending.
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  See you soon, everybody.