by Louis Navellier

May 21, 2024

The Biden Administration last week hiked its tariffs on Chinese electric vehicles (EVs) from 27.5% to 102.5%. Clearly, this is being done to shore up voter support in Michigan, a key swing state. The Biden Administration also bumped up tariffs on lithium-ion batteries, steel and aluminum from 7.5% to 25%, as well as semiconductors and solar cells from 25% to 50%. There is also a new 25% tariff on ship-to-shore cranes, plus a new 50% tariff on medical syringes. While some tariffs may be politically motivated to help Biden win Michigan, many of the other tariffs seem to be an act of desperation, since onshoring efforts have failed, so these higher tariffs are expected to contribute to higher prices and fuel inflation.

In another move to distance America from China, the Biden Administration is expected to announce the addition of 26 companies to what is known as the Uyghur Forced Labor Prevention Act Entity List. This list names businesses that the U.S. alleges are involved in exploiting forced labor from China’s Xinjiang region, where the Uyghur Muslims predominately live. These 26 companies are primarily involved in textile production, The Financial Times said, “America is pulling up the drawbridge” in trade with China.

Not to be outdone, former President Donald Trump, at his recent rally in New Jersey, said, “Biden should have done this years ago.” Trump also warned that Chinese companies will try to build cars in Mexico to avoid tariffs, by shipping them to the U.S. from closer destinations. Trump then said he would put a 200% tariff on Chinese-made cars in Mexico, despite an existing trade agreement with Mexico.

In the meantime, the best evidence that EV sales are waning came from Ford, which began cutting orders from battery suppliers to stem growing EV losses of up to $100,000 per vehicle. Ford is reducing EV spending by $12 billion, which will entail delaying new EV models and shrinking existing battery plants.

Ford’s Chief Executive Officer, Jim Farley, recently said its EV unit “is the main drag on the whole company right now.”  However, Ford is still fast-tracking the development of small EVs that will start at $25,000 and debut in late 2026. Also, VW teamed up with a Chinese partner, Xpeng, to build cheaper, smaller EVs. It will be interesting if Ford deepens its ties with China’s CATL to keep its EV costs down.

The Wall Street Journal published an excellent article about the demographic challenges much of the world now faces. The fertility rates have collapsed in Asia and Western Europe. The U.S. fertility rate has also declined below the replacement rate, but immigration is helping to offset our lower birth rate. Essentially, worldwide economic growth is expected to stall as populations decline, and Asia is a prime example, since the fertility rates in China, South Korea and other key Asian countries have collapsed.

Digitimes Asia reported a week ago on Friday that Apple reportedly has struck an agreement with Samsung Display for the development of foldable devices, according to industry sources. This essentially means that a foldable iPhone may be on the way. Whether or not there will be a foldable iPhone in time for Apple’s September launch of the iPhone 16 is questionable, but there is no doubt that Apple needs a big hit after losing its leadership when Samsung passed it recently in global smartphone sales. I have been calling for a few years for Apple to release a folding iPhone, which I expect will retail for $2,499.

I should add that the Commerce Department announced last Tuesday that retail sales were flat in April, after posting a revised 0.6% gain in March. Economists were expecting April sales to rise 0.4%. Vehicle sales declined 0.8%. Excluding vehicle and gas station sales (based on higher prices), retail sales declined 0.1% in April. Even online sales declined 1.2%, a sign that consumer spending is stalling. Retail sales are sputtering, due partly to higher gasoline prices causing consumers to spend less money on other items.

As the War in Ukraine Escalates, Energy Prices Could Soar – Putting Pressure on President Biden in the June Debates

The energy market is on edge, because the fighting between Russia and Ukraine is escalating, at a horrific cost to the troops on the ground. Russia reportedly lost 1,740 troops in a single day, plus 30 tanks and 42 armored vehicles, according to Britain’s Express on Monday, as it captured more villages in Ukraine.

The Russian/Ukrainian conflict has become a war of attrition, where Russia is advancing at tremendous costs (almost 500,000 troops killed so far), and Ukraine has also suffered tremendous losses and is a smaller nation, so it is running out of troops. As a result, Ukraine may become increasingly desperate. In addition to attacking Russian oil refineries and railroads, I would not be surprised if Ukraine sabotaged the Russian Arctic oil pipelines, which could send crude oil prices soaring!

Ukrainian President Zelenskyy has canceled his travel plans as Russia has reportedly assembled 500,000 troops for a new offensive against Kharkiv, Ukraine’s second largest city. Many Ukrainian soldiers are from the Kharkiv region and have been sustaining serious losses. Zelenskyy has been careful not to criticize the slow flow of U.S. aid, but he said, “All we need are two Patriot systems,” adding that “Russia will not be able to occupy Kharkiv if we have those.” In the event that Russia captures Kharkiv, I predict that $100 per barrel crude oil will be the eventual outcome, since either: (1) Ukraine will sabotage the Russian Arctic oil pipelines, or (2) Western nations will place a new embargo on Russian crude oil.

The crisis in Ukraine could make the first U.S. Presidential debate on June 27th a lot more interesting, since the Russian offensive on Kharkiv will likely be big news by then, especially if Kharkiv is captured by Russia. If President Biden does not do well on that first debate, there will be mounting pressure for him to step aside for a younger, more energetic candidate to replace him. The most likely replacement would be Gavin Newsom, who recently embarrassed himself when he blamed California’s abrupt shift from a budget surplus to a deficit on the “atmospheric rivers” that replenished the state’s reservoirs in the last couple of years. Since California was in a serious drought before the atmospheric rivers brought rain, blaming the state’s budget woes on rainfall is a bit bizarre. Obviously, there has been a capital flight out of California by businesses and wealthy individuals that contributed to the Golden State’s budget woes.

Navellier & Associates owns Nvidia Corp (NVDA), Apple Computer (AAPL), and Volkswagen Ag. (VWAGY) in managed accounts. We do not own Ford Motor Co. (F).  Louis Navellier and his family own Nvidia Corp (NVDA), Apple Computer (AAPL), and Volkswagen Ag. (VWAGY), via a Navellier managed account, and Nvidia Corp (NVDA), and Apple Computer (AAPL) in a personal account. He does not own Ford Motor Co. (F) personally.

All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.

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Louis Navellier

Louis Navellier is Founder, Chairman of the Board, Chief Investment Officer and Chief Compliance Officer of Navellier & Associates, Inc., located in Reno, Nevada. With decades of experience translating what had been purely academic techniques into real market applications, he believes that disciplined, quantitative analysis can select stocks that will significantly outperform the overall market. All content in this “A Look Ahead” section of Market Mail represents the opinion of Louis Navellier of Navellier & Associates, Inc.

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