Corporations “are not spending money in the United States, and I totally get why,” he said, adding that if he was a CEO or sat on a corporate board, “I wouldn’t be doing a big cap ex right now,” referring to capital expenditures.
Cohn said when corporations spend on things like property, plants, equipment or buildings, “The first thing you’re going to buy is steel and aluminum.”
“Why would you buy steel and aluminum at the world price — plus huge tariffs?” Cohn said.
Cohn’s remarks came at a particularly bad time for U.S. capital investment and manufacturing amid growing global concern about tariffs.
Morgan Stanley reported that its monthly index tracking corporate capital expenditures recorded its sixth consecutive drop in November, falling to its lowest level since July 2016. Meanwhile, the ISM index of manufacturing on Monday contracted for the fourth straight month, coming in worse than expected.
And the threat of more tariffs keeps coming. The U.S. Trade Representative has proposed that the U.S. retaliate over a digital tax that France approved in July targeting dozens of big tech companies including Facebook, Amazon and Apple.
U.S. stocks plunged Tuesday following Trump’s move to slap new steel and aluminum tariffs on Brazil and Argentina.
Cohn added that another concern is geopolitical uncertainty “if we get a change of presidency” after the 2020 election.
“What is health care going to look like? Are you going to be able to have corporate profits? Are we going to have certain taxes on corporate profits? What are they going to do with corporate buybacks? What are they going to do with corporate legislation? It’s a really tough environment,” he said.
He suggested that all the uncertainty is keeping the corporate world in a holding pattern.
“I think a prudent CEO or prudent board would say hey, let’s wait a couple of years. And we could probably make that investment in the future, or worse, we can make an investment in another country, and import those products,” he added.