Nonfarm payrolls increase…According to the Bureau of Labor Statistics, January nonfarm payrolls increased by 143,000. The 3-month average for total nonfarm payrolls increased to 237,000 from 204,000.

What does it mean – Since November we have seen payrolls expand (partially due to the holiday season) but more importantly we have seen it expand through January as small business optimism explodes. As we have seen in the past, skepticism and continued massive revisions are the new normal for the Bureau of Labor Statistics and many government “experts.”

As First Trust pointed out the skepticism is warranted. Over the last few years government “experts” have warned on issues ranging from COVID – “fifteen days to slow the spread,” six-feet distance rules that turned out to have no scientific basis, school lockdowns, dying from COVID versus dying with COVID…etc. – the list goes on and on. “Then the “experts” vouching for Trump-Russia Collusion in 2016-17 and then casting doubt about Hunter Biden’s laptop in 2020 and we can see why many investors have become skeptical about everything the federal government says, including the monthly reports on the economy, like the jobs report that comes out early every month.”

Government agencies have been their own worst enemy. The U.S. has a massive economy, and the government has allowed employees to work from home have not helped government efficiency and the ability to get reports out timely. We have seen record revisions since the government has allowed employees to work from home. Let’s see how things change going forward.

Small Business Index soars to record level…The National Federation of Independent Business (NFIB) reported that its optimism index rose 3.4 points to 105.1, following a historic monthly gain in November.

What does it mean – Small business is the heartbeat of America. The answers to our problems are all around us. The answer is us!! This election proved that we, the people, have a lot more common sense and are much smarter than policymakers.

NFIB Uncertainty indicator also fell by 12 points in December…On top of the Small Business indicator from NFIB, the uncertainty indicator also fell by 12 points in December, marking the largest two-month decline on record.

What does it mean – According to John Carney, “The drop reflects a shift toward greater clarity on the policy direction in Washington.”

The Advance Q4 GDP report showed real GDP decelerating…According to the Bureau of Economic Analysis, GDP fell to the seasonally adjusted annual rate of 2.3% versus 3.1% in the third quarter.

What does it mean – While we did see weakness from the overall economy, personal consumption expenditures were up 4.2%. Consumers continue to buck the trend.

 Shipments of manufactured goods jumped 0.6% in December…Following a 0.1% increase in November, manufacturing saw a significant short-term bump.

What does it mean – The weakness in factory orders was concentrated in the durable goods space, primarily in nondefense aircraft and parts. Business spending was up, evidenced by the growth in new orders for nondefense capital goods excluding aircraft.

Tariffs…In President Trumps first few days he announced a whole slew of Tariffs; within hours, every country named but China got inline to do business with the American consumer.

What does it mean – It is simple. While members of both parties, the media, and the ‘experts” who advocate for “Big Government Solutions and the status quo,” all went into epileptic shock. Yet, countries named by the President jumped in line to benefit from the American consumer.

Below is a great map from the Independent in London. Full disclosure. The map below is off. We are not threatening to invade Greenland. Another miss by media and the “experts” but should not take away from the power of the visual. A great point. The world is truly your oyster.

Trump announces 25% tariffs on steel and aluminum…After threatening several countries to get in line or face tariffs, Trump seeks to protect U.S. steel and aluminum industry.

What does it mean – Lost in the reporting is that the tariffs are reciprocal. Meaning that Canada, Mexico, China and others have 25% to 30% tariffs on U.S. Steel and aluminum. President Trump went on to say, “If they are charging us 130 percent and we’re charging them nothing, it’s not going to stay that way,” Trump said. “If they charge us, we charge them.”

A bit of history and the facts about Tariffs-

For nearly 180 years America became the wealthiest, most prosperous, and most powerful country in the world by using tariffs based on unique bilateral situations. Our nation successfully used tariffs as diplomatic leverage, raised revenue, and kept taxes low. Until 1913 tariffs accounted for nearly 95% of the revenue to the Federal Government. Tariffs can reshore industries and they can help us build economic relationships. For 180 years we protected our manufacturers, farmers, and raw material producers from foreign companies and countries from dumping cheap material into our markets.

From the very beginning, US leadership sought to protect and grow the American industrial base. This meant tariffs. Throughout the 19th century, American economists and leadership were strong advocates of industrial protection. At the ripe old age of 32 and the very first Secretary of the Treasury, Alexander Hamilton wrote extensively on this subject and was the intellectual leader of this movement before passing in 1804.

 George Washington-

In his inaugural address to the nation, George Washington wrote, “I use no porter or cheese in my family, but such as is made in America,” the inaugural President boasting that these domestic products are “of an excellent quality.”

As one of the first acts of Congress and of President George Washington was to enact tariffs. Its stated purpose was “the encouragement and protection of manufactures.”

In his 1790 State of the Union Address, President George Washington went on to say, “A free people ought not only to be armed, but disciplined; to which end a uniform and well-digested plan is requisite; and their safety and interest require that they should promote such manufactories as tend to render them independent of others for essential, particularly military, supplies.”

Thomas Jefferson-

After the war of 1812, Thomas Jefferson’s position began to resemble that of Washington. He became more convinced than ever that some level of protection was necessary to secure the nation’s political independence.

Jeferson went on to say, “experience has taught me that manufactures are now as necessary to our independence as to our comfort: and if those who quote me as of a different opinion will keep pace with me in purchasing nothing foreign where an equivalent of domestic fabric can be obtained, without regard to difference of price.”

Henry Clay-

In 1832 Clay stood in front of Congress and explained that “equal and reciprocal free trade never has existed; it never will exist.” He warned against what we have today “romantic trade philanthropy” … which invokes us to continue to purchase the produce of foreign industry, without regard to the state or prosperity of our own.”. Clay was, “utterly and irreconcilably opposed to trade which would throw wide open our ports to foreign productions without reciprocation” Talk about foreshadowing – Globalism really is the idea of romantic philanthropy. When did we elect our leaders to turn us into a charity for China, Latin America and Europe?

Clay went on to say, “When gentlemen have succeeded in their design of an immediate or gradual destruction of the American System, what is their substitute? Free trade! Free trade! The call for free trade is as unavailing as the cry of a spoiled child, in its nurse’s arms, for the moon, or the stars that glitter in the firmament of heaven. It never has existed; it never will exist. Trade implies, at least two parties. To be free, it should be fair, equal and reciprocal.”

William McKinley-

McKinley stated that, “under free trade the trader is the master and the producer the slave. Protection is but the law of nature, the law of self-preservation, of self-development, of securing the highest and best destiny of the race of man. It is said that protection is immoral…. Why, if protection builds up and elevates 63,000,000 [the U.S. population] of people, the influence of those 63,000,000 of people elevates the rest of the world. We cannot take a step in the pathway of progress without benefiting mankind everywhere.”

McKenley believed free trade destroys the dignity and independence of American labor… “It will take away from the people of this country who work for a living-and the majority of them live by the sweat of their faces-it will take from them heart and home and hope. It will be self-destruction.”

McKinley categorically rejected the “cheaper is better” argument. He said, “Buy where you can buy the cheapest. That is one of their maxims… Of course, that applies to labor as to everything else. Let me give you a maxim that is a thousand times better than that, and it is the protection maxim: ‘Buy where you can pay the easiest.’ And that spot of earth is where labor wins its highest rewards.”

“They say, if you had not the Protective Tariff things would be a little cheaper. Well, whether a thing is cheap or whether it is dear depends on what we can earn by our daily labor. Free trade cheapens the product by cheapening the producer. Protection cheapens the product by elevating the producer.”

“The protective tariff policy of the Republicans… has made the lives of the masses of our countrymen sweeter and brighter, and has entered the homes of America carrying comfort and cheer and courage. It gives a premium to human energy, and awakens the noblest aspiration in the breasts of men. Our own experience shows that it is the best for our citizenship and our civilization and that it opens up a higher and better destiny for our people.”

Theodore Roosevelt-

Roosevelt believed that America’s economic growth was due to the protective tariffs and encouraged the industrial revolution.

In his State of the Union address in 1902 Roosevelt stated that, “The country has acquiesced in the wisdom of the protective-tariff principle. It is exceedingly undesirable that this system should be destroyed or that there should be violent and radical changes therein. Our past experience shows that great prosperity in this country has always come under a protective tariff.”

Post WWII-

In 1947 the US and every country but the Soviet Bloc countries agreed to The General Agreement on Tariffs and Trade or GATT agreement. It is now known as the WTO or World Trade Organization as now China, Russia and nearly all the world are part of it. Since 1947 we now only have tariffs on roughly 30% of what is imported yet the US and its producers are subject to far more tariffs ranging from agriculture, steel, aluminum, autos, the list goes on and on.

Henry Clay warned against the idea of “romantic trade philanthropy.” He had a clear understanding of what it meant to open our ports to any and all goods regardless of what it meant to producers and employees.

After years of study, it is clear. Free trade is not so free.

In early 2017, Joseph Stiglitz wrote that “the American middle class is indeed the loser of globalization” (the diminution of international trade regulations as well as tariffs, taxes) and “China, with its large emerging middle class, is among the big beneficiaries of globalization”. “Thanks to globalization, in terms of purchasing-power parity, China actually has already become the largest economy in the world in September 2015”. When considering the term globalism, there is no difference between the term free trade or unrestricted illegal immigration.

In a study by David Autor, David Dorn and Gordon Hanson show that, “trade with China cost Americans around one million manufacturing workers between 1991 and 2007. Competition from Chinese imports has led to manufacturing job losses and declining wages.” They also found that offsetting job gains in other industries never materialized.

Because we did not protect our producers, our country’s safety, food supply and manufacturing are further at risk than ever before. We have witnessed the destruction of the rust built and great cities like Detroit, Cincinnati, and the mining towns in Pennsylvania, Ohio valley, and the coal mining towns of Virginia’s. Companies have closed and Americans have lost well over 1 million manufacturing jobs from 1991 to 2007. No longer do these companies order goods and services from local non-manufacturing firms, “but former industrial workers may be unemployed for years or permanently” according to David Autro, David Dorn and Gordon Hanson.

Another study by Daron Acemoglu and Brendan Price, estimates that competition from Chinese imports cost the U.S. as many as 2.4 million jobs in total between 1999 and 2011.

Study after study is also validated by the two above. They show that increased import exposure reduces wages in the non-manufacturing sector due to lower demand for non-manufacturing goods and increased labor supply from workers who have lost their manufacturing jobs.

Avraham Ebenstein, Margaret McMillan, Ann Harrison also pointed out in their article “Why are American Workers getting Poorer? China, Trade and Offshoring” these negative effects of trade with China on American workers.

The Economic Policy Institute, a left-leaning think tank, has claimed that free trade created a large trade deficit in the United States for decades which lead to the closure of many factories and cost the United States millions of jobs in the manufacturing sector. They show that trade deficits lead to significant wage losses, not only for workers in the manufacturing sector, but also for all workers throughout the economy who do not have a university degree. For example, in 2011, 100 million full-time, full-year workers without a university degree suffered an average loss of $1,800 on their annual salary.  This has led to increased competition and has driven down wages as workers who lost their jobs in the manufacturing sector and who have to accept a reduction in their wages to find work in other sectors are creating competition, that reduces the wages of workers already employed in these other sectors.

The Economic Policy Institute went on to say that the trade agreements have not reduced trade deficits but rather increased them. The growing trade deficit with China comes from China’s manipulation of its currency, dumping policies, subsidies, trade barriers that give it a very important advantage in international trade. In addition, industrial jobs lost by imports from China are significantly better paid than jobs created by exports to China. So even if imports were equal to exports, workers would still lose out on their wages.

God ole Henry Clay’s words could not resonate more today than they have today and for the American Citizen. His warning of a “romantic trade policy” (Globalism) should be an encouragement for us all…Transparency is shedding a light in the darkest corners of government. Revealing the real cost of going along to get along.

Could it be that Clay’s statement to congress was not just a warning to protect our ability to produce and lift all people and our economy, but a warning or a glimpse into the future that would grow government through the means of taxation and redistribution?

The very leadership and unelected bureaucrats who exist off managing the very problems they create find new value in “big government” policies conceived to manage by the very agencies created by government to pacify the very citizenry they are supposed to protect from the very government our constitution protects us from? Quite a vicious circle if we are not diligent and understand what we are voting for.

Klaus Schwab – “You will own nothing and be happy.” – Don’t forget the biggest globalist and free traders of them all, Claus Schwab, George Soros, Bill Gates, Xai, Trudeau, Macron, have spent billions over the last 40 years training and indoctrinating future leaders on how easy it is to be the few who make the decisions and rule from upon high. His merry bunch of disciples like Trudeau, Obama, Clinton, Macron, Newsome, Schiff and Cheney and the Bush’s along with many others shouting, “Free trade, Free trade!!!” Enriching themselves at the cost of their citizens and their countries’ treasury.

According to the Economic Policy Institute, “the manufacturing sector is a sector with very high productivity growth, which promotes high wages and good benefits for its workers. Indeed, this sector accounts for more than two thirds of private sector research and development and employs more than twice as many scientists and engineers as the rest of the economy.” The manufacturing sector, both large and small, provides I vitally important and a major factor in growing the US economy and those economies abroad. Manufacturing jobs provide excellent wages, and well-paid service jobs such as accounting, business management, research and development and legal services. Deindustrializing or offshoring manufacturing is also leading to a significant loss of these service jobs, also a very important driver to the U.S. economy.

However, other groups such as the CATO Institute, a libertarian or right-leaning think tank, say the opposite. They have said that free trade is not a significant contributor to deindustrialization trends. They go on to say that trade can lead to loss of low-skilled or superfluous manufacturing jobs, but these tend to be replaced by higher-paying, higher-skilled manufacturing jobs in other sectors where the U.S. has a competitive advantage. Unfortunately, the statistics do not validate the claim.

What does it mean–

Canada and Mexico have no leverage and China has even less. The U.S. imports 80% of Mexico’s exports and 78% of Canada’s exports. China’s trade surplus with the United States has been increasing, and in 2024 reached a record high of $992 billion. China Exports are roughly $3.4 Trillion. This means the US is nearly 30% of all exports from China.

While China is a massive producer of goods, their economy is a train wreck. They produce far more than their citizens can consume and rely on exports to feed their economy. They truly are the definition of using another’s kindness and charity to exploit their generosity. Even worse they are willing to cannibalize their own economy at the expense of their people. China is often caught dumping material like steel and aluminum on foreign markets, especially the U.S. In the last couple of years Biden complained about it and now Trump is taking action to stop it. This is exactly why we have tariffs.

Currently China’s planned economy cannot absorb the volume of production nor handle the social demand of its citizens. They need the American consumer far more than we need them.

According to the studies above, the U.S. has roughly lost 5 million manufacturing jobs to China at a cost of nearly $1 trillion per year. If those numbers are correct, it has cost the U.S. $200,000 per job. One must ask how many other jobs and local industries have been destroyed and how many people are permanently out of work or saw their income drop due increased competition for fewer jobs?

President Trumps threat of tariffs has been bilateral and specific to that country. They are not designed to hit an industry across all countries. They are targeted and because they are targeted, they give the country and the manufacturers the opportunity to change behavior. Remember President Trump said, “If they charge us, we charge them.”

Because the rest of the world seeks an open door and access to the American consumer, you, your businesses, your wallet, your values, have incredible leverage over Mexico, Canada, China, along with nearly every other country in the world. This would never have happened if we had not protected our farming, mining and manufacturing industries for nearly 180 years. One should ask themselves, “why the change nearly 70 years ago?”

I remember during the Cold War with Russia when American blue jeans, namely Levis, were highly sought after and Russia banned them and criminalized young Russians from bringing them into the USSR from trips abroad to Europe. Even the Boss himself made fun of it in his famous song Born In The USA. By the way, can someone put out a missing person report on Bruce Springsteen. Maybe they will find the real Bruce and return him when they release all the records from Area 51.

For the last 50 plus years we have given in to the fictitious addiction to “the easy way out.” As a nation we decided it was far easier to become more dependent on the government to solve our problems. As a nation we followed the herd instead and justified the safety of numbers Vs. the virtue of individual hard work and protecting individual liberty and self-determination.

As a nation we thought that if we compromised and gave up a bit of our sovereignty, freedom, and independence we could make the world safer and our and our enemies like us more. In reality, we subsidized the global economy through the destruction of our farmers, mining, and manufacturing industries. We now rely on the very nations we enriched and who still despise but depend on the U.S. They are now in control of most of our food and the resources we once developed, mined, and produced. For over 50 years we have traded our sovereignty for cheap goods and refusing to shift course because the “experts” said we should not.” It would cause inflation or hurt international relations.

All we need is a bit more freedom…Unfortunately for Big Government and unelected bureaucrats, they found out that private business, manufacturers, business owners, entrepreneurs, farmers, factory workers, employees, customers, families, and individuals all by themselves, without regulation, mandates, and extra rules, figured out that they matter and said enough is enough. Their jobs and way of life mean something, and they got past the political correctness and reengaged their God Given Inalienable Rights. Free from the yoke of government overreach, and as Kamala would say, “unburdened by what has been”, small businesses are excited for their future.

E Pluribus Unum – Free to solve “our” problems, the American people remembered that all they need is more of all of us U.S. citizens thinking things through on our own, figuring things out, with fewer rules from Washington or your local or state government. They saw through the political platitudes and realized these government rules, mandates, and regulations have proven deadly to business, healthcare, insurance, farming, and manufacturing industries and in time of need downright dangerous. Bureaucrats and their obsession to regulate and tax everything that moves, breathes, grows and dies have added a few barriers to the doers of the worls and may have slowed us down but the pursuit of the American Dream rages on as capitalists and the power of capitalism turn back the clock on the unholy alliance between government, corporate welfare, and unfair free trade. Thanks to free speech, freedom rings and liberty is shedding its bright light on the darkness of “Big Government and crony capitalism.”

Let’s roll America!!!

Doug De Groote, CFP®, MBA, CTC
Managing Director

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