Ohio senator supports Trump's tariffs: Short-term pain is worth it for the automotive industry chain.

Recently, Republican Senator Bernie Moreno stated that although tariffs on imports from Canada and Mexico will bring short-term pain to the domestic automotive industry in the United States, it is worth it for the industry chain because it helps to control illegal immigration and drug flow into the United States, and greatly promotes the "reshoring of manufacturing" to provide a large number of new jobs for the United States. According to the latest data released by economic development officials in Ohio, nearly 100,000 people in the state are employed in the automotive and related manufacturing fields, making Ohio the largest engine production state and the second largest transmission production state in the United States. Global automotive manufacturers such as General Motors, Stellantis NV, and Honda all have factories in the state. "Trump is 100% correct, all of us should support his call to take action against our two neighboring countries," the Ohio legislator said in a public interview last week. "Before they take necessary action, am I willing to endure some degree of short-term pain? Absolutely, 100%." Donald Trump, who officially returned to the presidency in January, said on Monday that U.S. trading partners had "no room" to prevent tariffs from taking effect on Tuesday. It is worth noting that Mexico and Canada are crucial for the U.S. automotive industry chain, with many core supply chains having large factories in these two countries, and U.S. domestic car manufacturers such as General Motors and Ford also have large car manufacturing plants in Canada and Mexico. Trump has always seen tariffs as a way to push Canada and Mexico to take more measures to reduce illegal immigration and drugs, especially the influx of fentanyl into the United States. It is understood that on Monday, U.S. President Trump announced at a news conference that global chip manufacturing leader TSMC will invest $100 billion in the United States, and the U.S. will impose a 25% tariff on Canada and Mexico on March 4. He said there was no room for negotiations with these two U.S. allies. "Tomorrow (March 4), we will impose a 25% tariff on Canada and Mexico, these tariffs are to compel these two neighboring countries to enhance border control." Some leaders in the U.S. auto industry have a different attitude from Republican Senator Bernie Moreno and Trump, warning that these measures pose a significant risk to industry profits, employment, and sales prospects. Lobbyists for car manufacturers near Detroit argue that vehicles that comply with North American parts procurement rules should be exempt from new tariffs. It is understood that Moreno officially proposed legislation supported by General Motors, Stellantis, and Toyota last week aimed at relaxing current fuel economy standards and emission standards, and revoking California's power to establish its own clean air rules. Moreno said these measures would provide flexibility and long-term stability for the entire U.S. automotive industry chain, making the industry chain healthier. The bill also proposes a 200% new tax deduction for wages of U.S. auto workers, provided that employers meet certain standards, Moreno said this would help offset the pressure brought by tariffs. Trump's erratic use of "tariff sticks" may lead the U.S. economy into a dilemma the Federal Reserve is least willing to face - stagnation. It is worth noting that Trump's latest tariff threat comes at a time when the U.S. economy is fragile, with persistent inflation rates still a major concern for Americans. Many economists believe that higher import tariffs will further push up domestic prices in the U.S., as businesses will try to pass on costs to consumers, and large low- and middle-income groups in the U.S. are already significantly cutting consumption due to high interest rates and sustained high inflation. Currently, U.S. consumption is only supported by the high-net-worth consumer group, and consumption is the core drive of U.S. economic growth. Before the PCE data report released last Friday showed a cooling of consumer spending, sentiment about stagnation had already risen significantly in the near term, with January CPI and PPI exceeding expectations and long-term inflation expectations for Americans even reaching the highest levels in nearly 30 years. The latest inflation expectations for February from the University of Michigan show that Americans' 5-10 year inflation expectations have reached a final value of 3.5%, marking the largest month-on-month increase since May 2021 and a new high since 1995, with Americans becoming increasingly concerned that Trump's increase in tariffs will lead to price hikes. The U.S. comprehensive PMI fell from 52.7 in January to 50.4, hitting a new low in 17 months, and more pessimistic data shows that the crucial huge service sector activities for the U.S. economy have contracted for the first time in over two years, with the service sector PMI preliminary value of 49.7 entering the contraction zone, significantly lower than January's 52.9, setting a new low since January 2023. According to the latest data released by the Institute for Supply Management (ISM), the price index for manufacturers' input prices soared to 62.4, the highest level since June 2022, indicating that after a record increase in commodity prices in January, prices may continue to rise. The latest consumer confidence index expectations index released by the U.S. Chamber of Commerce fell below 80 (usually indicating an economic recession), largely because people are concerned that Trump's taxation policy will lead to a significant increase in prices. The latest data from the Chamber of Commerce also showed that the consumer confidence index for February fell for the third consecutive month, decreasing by 7 points from January's 105.3 to 98.3, below the market's general expected 102.3, marking the lowest data since June 2024 and the largest monthly drop since August 2021. However, as evidenced by the recent inverted U.S. Treasury yield curve, such signals are far from certain, but these are the core reasons for the recent significant increase in expectations of "stagnation" in the U.S. economy. EY-Parthenon's Chief Economist Gregory Daco said, "There is a sense of stagnation in the air. Even though we haven't reached that point yet." He pointed out that "developments, especially in the past week, indicate that consumer sentiment indices are weakening, and spending."Also on the soft side, concerns about inflation - at least inflation expectations are rising."Inflation and stagnation, known as "stagflation", is undoubtedly the most difficult economic problem for the Federal Reserve. Under the backdrop of "stagflation", the Federal Reserve's room for interest rate cuts will be severely constrained, possibly leading to a severe recession in the US economy.