The protectionism debate has been a fascination of mine ever since I read the 1946 classic Economics in One Lesson (still my top economics book pick) many many moons ago.
The utter economic stifling, not to mention the freedom, the variety, the national security and the foreign relationship stifling, of protectionism is painfully obvious once we look just a little beneath the surface, and, alas, beyond our biases.
Aside from the platitudes I put forth above, if you’ve at all wondered why we’ve been so passionately opposed to the recently adopted and proposed tariff schemes, Campbell Soup this week pretty much told the story.
Here’s a pic from an interview that had me spinning in my chair when I watched it air:
And here’s from the CNBC article that featured the above pic this morning:
“What I’d like to do, though, is to emphasize again the limited impact,” he began. “This is a can of Campbell’s Soup. In the can of Campbell’s Soup, there’s about 2.6 cents, 2.6 pennies, worth of steel. So if that goes up by 25 percent, that’s about six-tenths of one cent on the price of a can of Campbell’s Soup.
“Well, I just bought this can today at a 7-Eleven down here, and the price was $1.99. So who in the world is going be bothered by six-tenths of a cent?”
It turns out the company has been bothered by it plenty.
Campbell posted a $393 million loss Friday and said it now expects profits to decline by 5 percent to 6 percent this year, worse than earlier projections of between 1 percent and 3 percent. In addition, CEO Denise Morrison stepped down as the company announced a strategic review to try to reverse the sales slump.
Chief Financial Officer Anthony DiSilvestro pointed directly to the tariffs as a cause of the company’s woes.
“At this stage, given what we know about accelerating cost inflation in part due to the anticipated impact of import tariffs and the continuing headwind on transportation and logistics cost, we expect our margins will be down in fiscal 2019,” he said.
Later, when facing tough questioning from an analyst on why the company’s “tone is so negative” on its outlook, DiSilvestro responded that he was just “trying to be transparent” about the obstacles Campbell faces.
Again, he cited tariffs as a major factor in a broader scenario of rising costs.
“The issue is primarily one of cost inflation and we’re seeing and expecting an acceleration on the rate of inflation across a number of ingredient and packaging items,” DiSilvestro said. “For example, we expect double digit increases on steel and aluminum. A lot of that driven or all of it’s driven by the impact of anticipated tariffs.”
Shares plunged 11 percent following the deluge of bad news from the company and were down nearly 27 percent for the year as of late-morning trading.
A spokesman for Ross declined to comment Friday. During his March CNBC appearance, he added that, “all this hysteria is a lot to do about nothing.”