What Happens After What Happens
Most people have heard of the Butterfly Effect. Basically, the concept is that a small change in a system will create larger downstream consequences.
The focus of news media, and our short-span interest generally looks at the first level effects of a change. For example, we look at the destruction caused by a hurricane and the direct aftermath, but once that story is over, we don’t follow up with the longer-term effects.
After billions of dollars in damages to homes, infrastructure, and businesses, insurance premiums rise, and coverage becomes exceedingly difficult for many property owners.
Thousands of miles of roads and bridges may be damaged or destroyed, disrupting transportation and accessibility, having lasting effects on local and regional economies.
Chronic diseases are exacerbated placing strains on the population, the hospitals, and the healthcare infrastructure.
Already marginalized communities face difficulties in accessing resources and jobs, placing a strain on the community and the State by increased funding for the needy, either through existing programs or through emergency programs.
Ecosystems including rivers, deltas, flood plains and creeks can be changed, impacting wildlife and natural resources, and potentially damaging water supplies.
And agriculture and livestock businesses can be displaced, impacting local and regional food supplies.
Think about how some of the new tariffs will affect costs to you downstream. Even if you feel that you can absorb some of the price increases in products, there are other costs.
TARIFFIS ON AUTO PARTS
When auto parts increase in price, so do repair costs.
When repairs increase in price, the cost to insurers to provide coverage for those repairs increases.
The net effect will be increases in Auto Insurance rates, an increase in uninsured motorists and higher costs for everyone. If the actual pool of insured people decreases, insurance actuaries will advise increases in premiums due to increased risks.
TARIFFS ON AUTOS
When auto manufacturing costs rise, so do the prices of automobiles.
If you have replacement coverage in your Auto Insurance Policy, those costs increase as well, so you can expect your Auto Insurance rates to rise to cover this too.
TARIFFS ON BUILDING MATERIALS
As lumber, appliances, wiring, plumbing, and all the other expenses in building a house increase, we will see the costs of houses increase.
When the cost of housing or repairs increase, so will Homeowner’s Insurance rates.
Once again, if you have replacement value insurance, those increases in costs will result in additional increases in insurance premiums.
Increase cost of housing will result in less buyers, putting strains on the housing industry to off-load existing inventory and to project future potential sales.
TARIFFS ON FRUITS AND VEGETABLES
We understand how these tariffs will raise grocery prices as well as suppress the availability of many items in seasons in which they are not possible to be grown domestically.
But consider the waste products from processing these items such as the peels, seeds and pomace from these products. These are not disposed of as waste; many are sold to customers in other industries.
For example:
Apple peels and pomace are a source of pectin used in jams and jellies.
Citrus peels are used as flavorings and natural preservatives in food and beverages.
Pomace and Peels from grapes, oranges, and pumpkins are used as feed for livestock.
Pharmaceutical Companies use enzymes, polyphenols and oils from these wastes.
Cosmetic Companies use seeds from fruits.
All of these products will see price increases due to the tariffs on imported fruits and vegetables, and those increases will be amplified by the resulting shortage of materials as imports shrink.
TARIFFS ON TVS
We understand that these tariffs will increase the price of TVs for the consumer.
But these screens and the electronics that drive them are often integral parts of tools used in manufacturing equipment and safety systems.
We can expect those items to see price increases also. Those increased costs will lead to larger costs for building and maintaining new factories. This adds to the costs of constructing manufacturing facilities, particularly those that were specifically designed to produce products to compete with offshore fabricators. This makes the economics of competition even more complicated.
TARIFFS ON CLOTHING
These tariffs will increase the prices of attire that you purchase in stores.
But it will also increase the costs of uniforms, work clothes and protective wear, increasing the costs of running Police Departments, Fire Departments, Security Companies, factories, hospitals and laboratories.
It will also increase the costs of school uniforms (if your school requires them) as well as the costs of high school football, and other sports’ uniforms. This will put additional strains on school budgets, which may require increases in property taxes.
Likewise, commercial linens are made offshore, so the costs to restaurants for tablecloths, napkins, chef’s uniforms, towels and rags will increase, driving already rising costs for those establishments even higher, increasing the price for you to dine out.
TARIFFS ON ALUMINUM
This will increase the cost of canned beverages, canned fruits and vegetables, and canned sauces and soups.
But aluminum is also used is a wide variety of other products such as lawn furniture, window frames, electronics, airplanes, automobiles, etc.
Consider the effect that increased cost on aluminum will have.
If beverage bottlers switch to steel or glass, the weight of the product increases and likewise the shipping costs increase. That will result in price increases.
Aluminum is used in electronic devices, heat sinks and electrical transmission lines. Increased costs for repairing or expanding electrical grids will generate increased utility prices.
Aluminum is used in the kitchen, not only in foil form. It is used in appliances and cookware, utensils, pans and baking sheets.
In construction, Aluminum is used in skyscrapers instead of steel; it is used in door hardware, window frames, and doors. It is also used in sandpaper and in bricks.
All of these uses are dependent on supply, and if not available domestically, need to be purchased and imported. We currently import half of the aluminum we use.