This afternoon, President Trump visits a tank plant at Lima, Ohio to underscore the return of manufacturing jobs in the state and in the country. The 78-year-old plant was on life support not long ago when it was down to just one tank per month.  Now, it’s making six tanks each month.  There are projections of 34 tanks per month, which means the 600-person workforce will swell to more than 1,000.

The M1 Abrams MTB (Main Battle Tank) was seen as a relic in modern warfare, but it has reemerged as a vital weapon.  The mayor of Lima, Ohio David Berger says the tank is “the only thing keeping the Russians in check.”

The United States military has made big orders for tanks and upgrades, but orders have also poured in from the Middle East:

• Iraq
• Saudi Arabia
• Kuwait

The improved fortunes of Lima, Ohio are also the improved fortunes of General Dynamics (GD) and its shareholders.  Management is hiking the annual dividend next month to $1.02.  That dividend has climbed steadily since 2014, when it was $0.56. 

It should be noted that candidate Trump won 67% of the vote in Allen county Ohio in 2016.

GD Chart

Trump and Manufacturing

President Trump’s policies have had a net positive impact on Ohio and other manufacturing states.

Total manufacturing jobs were 12,368,000 in January 2017 and are now 12,834,000 = +466,000.

Manufacturing jobs in Ohio were unchanged in the full year 2016 after peaking at 693,000 in June 2015.  They’ve now climbed to 704,800; up 23,000 since January 2017.

Overall, manufacturing wages have also taken off. 

There is no doubt these numbers could have been better, as tariffs and retaliatory actions have negatively impacted the price of industrial metals.  Ohio is the 7^th most impacted state from tariffs:

• #1 Canada
• #5 Mexico

Even with that in mind, Ohio, like all the other states in the so-called rust belt, has seen overall employment improvement including in manufacturing.  Many were losing manufacturing jobs and had given up hope of every regaining them. 

China Trade & Federal Reserve

Moments ago President Trump said tariffs on Chinese goods would remain in place even if there is a trade deal.  The inference is tariffs are a tool to make sure China lives up to its promises, which has been a major concern for everyone.   While the market edged lower on the comments, there isn’t any panic. The comments aren’t necessarily new, and many think the comments were mostly for Chinese consumption, and it’s just part of the negotiating process.

Dow Jones Industrial Average before and after Trump’s China Trade comments

• 12:31 25,737
• 12:36 25,682
• 1:08 25,730

Will the Dot drop?

As for the Fed, I think it boils down to seeing the so-called Dot Plot moving lower with clear evidence there will be no more than one more hike this year.   I think we’ll get that, but it’s not guaranteed.

 

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