THIS STOCK JUST HAD ITS WORST DAY SINCE BLACK MONDAY / CASEY DAILY DISPATCH

This Stock Just Had Its Worst Day Since Black Monday

By Justin Spittler, editor, Casey Daily Dispatch


The trade war just claimed a new victim.

No… It’s not one of our major trading partners. It’s not a Chinese or Mexican company, either.

It’s an American company.

I’m talking about Whirlpool.

I’ll tell you exactly why this major laundry equipment manufacturer is suffering in a second.

But first, let me address something that you may be asking yourself…

• How did Whirlpool become a loser in the trade war?

It’s a good question. You see, President Trump introduced a 20% tariff on imported washing machines in January…

And just in case you don’t know, a tariff is a tax on imported goods. It’s intended to make domestic goods more competitive than foreign goods.

So, many people thought this tariff would help Whirlpool. The company’s CEO, Marc Bitzer, even said the tariffs were “without any doubt, a positive catalyst for Whirlpool.”

It’s clear he no longer feels that way.

On Tuesday, Whirlpool shared some bad news. It said that its profits for the year will likely come in much lower than expected.

The news sent Whirlpool’s stock into a tailspin. It ended Tuesday down 14.5%. That’s the stock’s biggest one-day decline since “Black Monday” in 1987.

Now, companies cut profit forecasts all the time. Usually, it doesn’t trigger a crash like this.


• But that’s not the only problem facing Whirlpool…

You see, Whirlpool’s operating costs are soaring…

Here’s Bitzer:

Global steel cost has risen substantially and, particularly in the US, they have reached unexplainable levels.

…as a result, we're revising our raw material inflation guidance for 2018.

If you’ve been reading the Dispatch, you can probably see where I’m going with this. Trump didn’t just impose tariffs on imported laundry equipment.

Earlier this year, he slapped a 25% tariff on steel imports and a 10% tariff on aluminum imports.

That’s a problem for Whirlpool. Its products require a lot of aluminum and steel. And according to Bitzer, steel prices in the U.S.—thanks to tariffs—are now 60% higher than the rest of the world.

But here’s the thing…

• Whirlpool won’t be the last U.S. company that suffers from the trade war…

Many manufacturers need steel to build products. And just like Whirlpool, their profit margins will be squeezed if U.S. steel prices don’t come back down to earth.

But this isn’t just a problem for Corporate America…

You see, companies aren’t just going to sit back and watch their profits dry up. They’re going to pass along their higher operating costs to everyday people.

• We’re already seeing this happen…

Just look at the chart below. It shows what laundry equipment prices have done since Trump introduced the 20% tariff on imported washing machines back in January.




As you can see, they’ve jumped 20% since March. That’s more than washing machine prices rose in all of 2012, the last time the U.S. issued tariffs on washing machine imports.

That’s a big jump. But it’s likely just the beginning.

Think about it. Whirlpool is just starting to feel the pinch of tariffs. This means it (and other companies like it) could soon have no choice but to hike prices even more.

• This means everyday people will suffer from the trade war, too…

And that’s the last thing the average American can afford. After all, inflation is already on the rise.

The Consumer Price Index (CPI), a broad measure of inflation, is now rising at its fastest pace since 2012. And the Producer Price Index (PPI), another popular measure of inflation, is also climbing fast.

In fact, it just had the biggest yearly jump in nearly seven years.