What "America First" Would Mean for Globalization By Brad Thomas, Editor, Wide Moat Daily As the saying goes, "When America sneezes, the world catches a cold." In other words, everyone feels the effects of an economic slowdown in the U.S. This only makes sense when we're the world's largest economy and also the largest consumer market. Last year, the United States imported about $3.1 trillion worth of goods, including cars, pharmaceutical products, and technology products. A lot of countries make a lot of money by providing "stuff" to U.S. consumers. If U.S. consumers aren't happy, those countries aren't either. But what happens if U.S. consumers are happy… but not importing? Or, at the very least, importing less? What if the trend of onshoring continues under the new administration? What does that world look like? That's the question roiling the global markets now that former President Trump is going to be president again. Understandably so. I'm sure we all remember his international policies last time, aggravating China repeatedly with tariffs and threats of tariffs. And he's pledged to go even harder on his America-first policies this time around. While campaigning this year, he pledged to put a 20% duty on foreign goods. Minimum. For China, that number could rise to 60% or higher. Most of the mainstream press took that at face value. But I think I know what the president-elect is actually planning… Trump is, after all, the author of The Art of the Deal, a book about successful negotiations. He knows that coming in with high demands from a position of strength is a great way to reach your real – more reasonable, yet still ambitious – goal. And during his speech at the New York Economic Club, he responded to a question on how he would approach economic sanctions: The problem with what we have with sanctions – and I was a user of sanctions, but I put them on and take them off as quickly as possible because, ultimately, it kills your dollar and it kills everything the dollar represents, and we have to continue to have that, be the world currency. So, he understands these policy levers don't come without their risks. Even so, I understand why the global markets are roiling right now, tensing up in expectation of what's to come. If Trump has his way – and it looks like he will with majorities in both the House and Senate – we're going to be looking at a very different international landscape to invest in by the time he's through. But believe it or not, I think it's going to be a good one. For everyone involved. A Realistic View of America-First Policies On Wednesday, Bloomberg published the dire headline: "Rest of World's Markets Broken by Trump's America-First Plan." "Equities excluding the U.S. are tumbling," the article reads, "with an MSCI gauge at its lowest in three months. An index of developing-market currencies has lost more than 1% following the U.S. election, coming close to erasing this year's gains. European stocks and the euro have flopped." China and Mexico, of course, seem to be particularly shaken. Part of the reason why U.S. stocks soared this past week, it turns out, is because big fund managers are taking Trump seriously. They're putting their money where his mouth is – and expecting to reap the benefits in the long run. Bloomberg quoted Michael Brown, a senior strategist at Pepperstone, who put it this way: The 'U.S. exceptionalism' theme looks like it still has plenty left in the tank. I still have full faith in the bull case for equities, particularly with the incoming Trump Administration. Now, we all have to recognize that there will almost certainly be short-term pain for many of these U.S.-based companies. Because many of them rely on major operations outside of the country. For instance, there is no such thing as a purely American vehicle anymore. Ford and General Motors consistently outsource their labor, their research and development, and their parts. As such, The Street reported in 2022 that the Lincoln Corsair was the most "American" product on the road... Only 72% of its "content" came from the U.S. and Canada. That's right, the analysis didn't even differentiate the two countries. Regardless, in order to reap the biggest benefits from Trump's MAGA push, these businesses will have to spend more in the short term. They'll have to build more plants on American soil, hire more Americans at higher salaries, and spend more on resources. Then again, they'll probably have far fewer recalls this way. And, since the U.S. populace, in general, will be incentivized to buy homemade products, they'll find a greater consumer base against the long and growing list of outside competitors. It's a worthwhile venture to undertake here at home. Make the World Great Again As for the rest of the world scrambling to deal with Trump's victory? Believe it or not, I'm neither uninformed nor indifferent to that problem. Being American with American children, I have no problem admitting that I'm America first. But I also think that the Chinese should be China first. That Italians should be Italy first. That Brazilians should be Brazil first. That Nigerians should be Nigeria first. And so on. No matter what country you pledge allegiance to, though, you have to recognize a hard reality: that sometimes you need to lose something to capture the best long-term benefits. For instance, China currently suffers from a disturbingly high dependence on slave labor. This isn't a secret. Nor is China alone in this. You would probably be shocked at how many of the everyday items you use are directly linked to such practices. Here's a peek, courtesy of the Department of Labor's "2024 List of Goods Produced by Child Labor or Forced Labor" report: - Furniture and lumber from Belarus
- Garments from Burma and Mauritius
- Aluminum and metallurgical grade silicon from China
- Cobalt ore (which is used in EV batteries, jet turbines, and other industrial products, as well as pigment for consumer goods) from the Democratic Republic of the Congo
- Shrimp and sugarcane from India
- Nickel from Indonesia (which is used in stainless steel, jewelry, medical devices, batteries, scientific discoveries, and computers).
And that's the very short list. Ultimately, slavery is a long-term loss for any country that relies on it (or turns a blind eye to it). It's a moral wrong, first and foremost. But economically, it's shortsighted. There's always a reckoning somehow, someway, not to mention a devaluation of possibilities along the way. And for the end consumer, too often, they have no idea what type of labor or environmental practices were used to create the goods they buy every day. The process of onshoring means quality control and ensuring that the products we use every day are made ethically… and safely. It's an uncertain time. I understand. But I still see plenty of reasons to be optimistic for the country... and the world. Regards, Brad Thomas
Editor, Wide Moat Daily
MAILBAG What other factors do you think play into Trump's "American first" plan? Write us at feedback@widemoatresearch.com. | 
