First let me say this is an odd Thanksgiving post, but it's been sitting in my drafts and with the holiday I finally had time to finish writing my post.
This entire election cycle there has been one hot button word, "Tariffs". In a pair of posts on his Truth Social site Trump said he would impose a 25% tax on all products entering the country from Canada and Mexico, and an additional 10% tariff on goods from China, as one of his first executive orders.
This week Mexico suggests it would impose its own tariffs to retaliate against any Trump tariffs. President Claudia Sheinbaum suggested that Mexico could retaliate with tariffs of its own, after U.S. President-elect Donald Trump threatened to impose 25% import duties on Mexican goods if the country doesn’t stop the flow of drugs and migrants across the border. Sheinbaum said she was willing to engage in talks on the issues, but said drugs were a U.S. problem.
Since it seems there's a lot of confusion around what a tariff is and how it works I thought I'd simplify it down. Trump insists that tariffs are paid for by foreign countries. In fact, its is importers or American companies that pay tariffs, and the money goes to U.S. Treasury. Those companies, in turn, typically pass their higher costs on to their customers in the form of higher prices. That’s why economists say consumers usually end up footing the bill for tariffs.
What I'm seeing with this conversations is what we in the business call a trade war. One tariff would be followed by another in response, and so on until we put at risk common businesses. It’s not clear how serious Trump’s threat is, but I took action yesterday to set up some trades just in case.
I have been looking at tariffs and immigration will impact Home Depot and Walmart. Walmart is the largest importer in the retail industry, with over 2.1 million employees and a substantial lead over its runner-up, Target. Home Depot is third on my list and the construction industry is heavily tied to illegal immigration. Undocumented immigrants play a significant role in the US construction industry. According to the American Immigration Council, in 2021, undocumented immigrants made up 23% of the construction laborer workforce in the United States.
With that I opened WMT 2/25 puts in WMT and HD. The HD puts where purchased at a strike of $400 for $5.00 and I opened 5 contracts. I opened 25 $82.5 contracts for $0.80. I'm using this to hedge my portfolio. I have started to trade more in my Roth IRA since gains are not taxed.