The Tariff Effects You're Seeing

'Disaster awaits': What you know that Wall Street doesn't... The hidden fees squeezing American businesses... Rising bills for auto parts, paint, and aluminum... Elon Musk's politics dinged Tesla shares again... 'Shut up, Dan'...

We asked about tariffs, and you answered...

In yesterday's edition, I (Corey McLaughlin) put out a call to the business owners and operators in our audience... I encouraged you to share your experiences and observations about how tariffs – real or threatened – have been affecting business or your local economies.

And as ever, you all delivered. So today, I can present the best collection of real-world reports on what tariffs are really doing to the economy that I've seen since this whole story started months ago.

I'm going to begin sharing your replies today.

In general, here are the takeaways...

We'll start with subscriber K.M., who says his company tapped him as a 'project manager for tariffs' in March...

He says "disaster awaits," and companies in his industry will fail if policies aren't clarified by the end of this year...

I work for a large automotive supplier and in March was asked to take on the additional position of project manager for tariffs. I know, lucky me...

The auto industry is a high capital expense business with paper thin margins. I see the supplier claims and projections of actual tariffs that have been levied on imported components from a truly global supply base.

It's taken months to build the capability to analyze tariff impact across thousands of component parts from suppliers. This is like a giant coiled spring that given time will unleash all its energy as cash flow is sucked out of the supply-base and companies fail.

In the short-term, suppliers are just trying to survive and figure out what the tariff costs are and what options they have. But longer than six months is when disaster awaits.

Imagine trying to [source] from other countries to the US and everyone is asking the same U.S. supply base to quote their tens of thousands of components. There isn't a supply base in the U.S. to produce the components and some of them simply are only produced in China at massive scale. So, there is no solution for a company to invest in lower volume manufacturing outside of China for some commodity parts.

Think ball bearings, fasteners, electric motors, magnets... Reality will hit in the fourth quarter in my view, unless there is a clear way for the supply-base to recover the tariffs that started to hit in March.

In the same industry, subscriber B.B. is the CEO of a technology-solutions business for autos, and says he plans to pass on higher costs from tariffs...

We moved production from China to Vietnam in 2021 after 25% tariffs. Now faced with 20%. I want to pass through about $5M in cost to dealers, if possible.

A complicated situation...

Here's subscriber P.C., an executive with a paint and coatings company, who shares a similar concern as K.M. about their low-margin business, with a few more layers complicating the situation. P.C. writes...

The paint manufacturing industry is currently facing tariffs on chemical ingredients that are not produced domestically. These ingredients are essential components in the resins, coatings, and paints manufactured here in the U.S.

Since companies in our industry typically operate on thin margins, we will all need to pass these additional costs along in order to maintain profitability. While the impact is being felt now, it's largely because many suppliers had anticipated this issue and stocked up earlier in the year. Unfortunately, those inventories are now largely depleted.

It would be ideal if we could source all of our raw materials from U.S.-based manufacturers. However, the U.S. made a policy decision years ago not to prioritize domestic chemical manufacturing due to the environmental concerns it poses. As a result, much of that production was offshored. We're now experiencing the consequences of that decision – supply chain delays and unpredictability – as chemical manufacturers, distributors, and paint and coatings producers navigate the constantly shifting tariff landscape.

To illustrate the complexity, a chemical product manufactured in the U.S. might contain as many as 20 different ingredients sourced from around the world. This is a challenge for large corporations and even more costly and difficult for smaller businesses like ours.

It's important to note, in our industry, the tariffs are not absorbed by the country of origin – they're paid by the purchaser.

Thank you for the opportunity to share our perspective on this challenging situation.

'Tariff fees' are a new thing...

We received a couple examples of businesses finding new "tariff fees" on invoices nowadays – like from L.B., a small-business owner...

I am an interior designer and own a small business. I have been significantly affected by tariffs... 70% of my suppliers now have a line item on their invoice for fabrics, furniture, etc., coming from Europe and elsewhere with a 'tariff fee'.

I have received letters from many vendors saying they are being forced to raise prices due to tariffs.

We had placed orders for some furniture and lighting made in France at the beginning of the year, before the tariffs, yet when the fabrication was complete and the lighting and furniture was shipped to the U.S., we got a large tariff invoice from FedEx, who shipped the goods...

Trump and his people are insane to say that everyday Americans are not paying higher prices. We ARE!!

Subscriber T.D. said he thought these fees might be "hidden" from conventional inflation price metrics...

I read your email earlier today asking about businesses' feedback regarding tariffs affecting prices. Just a quick note that in our businesses, we've primarily seen tariff costs being passed on in the form of surcharges, which are separate line items on invoices. I'm not sure that the various product price metrics will pick this up. However, it's been a very real overall cost increase for us. For what it's worth.

The uncertainty is paralyzing...

Subscriber B.R. works in architecture and says the industry is in a slowdown because of tariffs. But activity picked up as belief has grown that tariffs may not be as stiff as once imagined, citing the popular abbreviation for "Trump always chickens out." Here's more...

Architecture firms are leading indicators of growing, shrinking, or stagnant economic activity. The AIA's Architecture Billings Index ("ABI") reflects what we are experiencing in our own firm: clients are hesitant to pull the trigger on projects given the level of manufactured economic uncertainty (aka tariff threats). We saw a slight uptick in activity within the last few weeks given that folks are figuring out that TACO is a thing, but the ABI remains below 50, having turned positive for the first time in a while last November.

G.N. runs a sporting-goods company...

We cannot eat the higher tariff costs and are passing them on. Consumers pay higher prices. And we do not know what the final tariffs will be. It feels terrible to be in limbo...

And, simply put, yes, prices are going up...

Here's subscriber Joe F. with an observation that prices are already rising in supply chains...

I own an industrial equipment dealership, and our manufacturers have already raised prices by 10% to 15%... I'm not impressed with Trump's ability to do business.

And M.H...

I have a 10% price increase on my aluminum docks, thanks to the tariff.

On the other hand...

Out of everyone who has written in so far, only one says he or she hasn't seen any price increases. That's subscriber T.P., who says...

We are a contracting business [near Seattle]. Everyone talked about increased prices, but so far we have not seen any.

So if you have nothing to report or want to present a different view, that would be useful to hear as well.

One of the great things about writing this daily letter, which has been my responsibility since early 2020, has been hearing about your real-world experiences, including living and working through major economic events.

I've been with the Digest through the start of the pandemic and the government response to it... the outbreak of high inflation... "meme stock" mania in 2021... the bear market of 2022... and seemingly endless recession fears as interest rates rose to levels not seen in about 15 years.

The latest tariff situation falls into the same category.

As long as you keep your notes coming, we'll keep the conversation going. Send your reports and stories to feedback@stansberryresearch.com.

They give us – and your fellow subscribers – a great sense of what's actually happening on the ground in the U.S. compared with what you find in conventional media and social media, and we love to hear from you.

Now, I'm turning things over to Nick Koziol for another fascinating report... on Tesla (TSLA) and Elon Musk, and a divided sentiment about the stock from two opposite groups of people.

Tesla investors want Musk's attention back...

As CEO of Tesla, Musk has had plenty of side projects – from SpaceX to social media platform X and the more overlooked solar-panel company SolarCity.

Over the past year or so, he turned to politics... But at the end of May, Musk announced his time was up at the Department of Government Efficiency ("DOGE"). And, at the time, that was welcome news for Tesla shareholders.

From inauguration day until April 22 (when Musk first said he'd be spending less time at DOGE and in the Trump administration), Tesla shares fell more than 44%.

The stock immediately snapped back more than 50% by the end of May, with investors hoping Musk could now focus on Tesla's own issues instead of the government. That's because there have been plenty of problems piling up for the electric-vehicle giant...

On the company's April 22 earnings call, Tesla said that first-quarter revenue fell 9%, with auto revenue falling 20%. And its recent robotaxi launch in Austin hasn't gone smoothly – with regulators asking for more information after seeing videos of the cars driving erratically.

So we'd assume that Musk would have his hands full back at Tesla.

But Musk's Tesla 'focus' didn't last long...

As Trump's "Big, Beautiful Bill" was moving through Congress, Musk publicly bashed it and the president. He lamented how the scale of its new spending made all the work of DOGE relatively meaningless. As we wrote in the May 28 Digest...

As part of an interview that's due to air in full on Sunday morning, Musk, who is now visibly back in his roles as CEO of Tesla (TSLA), SpaceX, and the social platform X (and wearing an "Occupy Mars" t-shirt), said he was "disappointed to see the massive spending bill, frankly, which increases the budget deficit... and undermines the work that the DOGE team is doing."

And this began to fray the relationship between Musk and Trump. More from that Digest...

But the main point is that this situation sure looks like a "big, beautiful breakup" between Musk and the White House... and between austerity and reality.

This past weekend, after only a month with his full focus back on Tesla, Musk announced that he formed the "America Party" – hoping to become a third major political party – after the "Big, Beautiful Bill" became law.

Musk even enlisted the help of Tesla's chief financial officer as the treasurer of the new party. So politics could be tying up the time of two Tesla executives rather than one.

And on Monday, the first trading day after Musk unveiled this plan, Tesla shares fell more than 6%. They're now sitting 18% below their "I'm leaving DOGE" high. And some notable Tesla investors are getting worried...

Longtime Tesla bull Dan Ives, who has the highest price target on the stock according to CNBC, posted on X yesterday to call for changes...

Musk saw, and he didn't take kindly to points No. 2 and 3 – the ones that show concern about Musk's focus as CEO.

He replied to Ives' post: "Shut up, Dan."

Retail traders still love the stock, while insiders don't...

According to data from Charles Schwab, Tesla was the most bought stock from retail investors in the month of June. And no matter what is happening with its business, individual investors have been buying the dip in the shares.

As Schwab's head trading and derivatives strategist Joe Mazzola put it in the company's monthly Schwab Trading Activity Index report...

People treat TSLA as a very tradeable asset; investors saw a 20% pullback and took advantage.

Meanwhile, Tesla's insiders – including Elon Musk's own brother Kimbal – have been selling the stock hand over fist.

According to data from FinViz, insiders have sold more than $630 million in stock over the past 12 months. More than one-third of that selling came during May's rally. And in the past year, insiders have collectively bought just $1 million worth of shares.

With Tesla's shares still incredibly expensive today (at 169 times earnings), the auto business struggling, and Elon Musk's focus not entirely on the business, the insiders are happy to pass on the risk to hungry retail investors.

We'd point back to Mazzola's use of the word "tradeable" when describing Tesla's stock. Folks might make money trading the volatility, but only if they catch one of the sharp rallies (like Greg Diamond has in Ten Stock Trader).

But the wild price swings in Tesla, and no sign of Musk stepping away from such a public political posture, make it a more difficult long-term investment.

You can find better buys in the market today. Our proprietary Stansberry Score rates Tesla a 63 out of 100, with "C" grades for valuation and capital efficiency.

That's not the worst report we've ever seen. But for a nearly $1 trillion company, we'd like to see "A" grade material – like fellow mega-caps Microsoft (MSFT), Apple (AAPL), and Alphabet (GOOGL) presently boast.

New 52-week highs (as of 7/8/25): Alpha Architect 1-3 Month Box Fund (BOXX), iShares MSCI Germany Fund (EWG), iShares MSCI Italy Fund (EWI), iShares MSCI Spain Fund (EWP), and TransDigm (TDG).

Your e-mails about tariff impacts and observations have filled our mailbag, and we shared a lot of the replies above. Keep them coming. If you have further insights for us, or any other comments or questions, as always e-mail us at feedback@stansberryresearch.com.

All the best,

Corey McLaughlin and Nick Koziol
Baltimore, Maryland
July 9, 2025

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