BofA Sees Long-Term Upside in Sonic Automotive (SAH), Target raised to $94
An auto warehouse filled with newly acquired used cars. According to the analyst, the slight downward revision in U.S. auto sales and production estimates for 2025 and 2026 accounts for potential headwinds, including tariff-related disruptions, supply chain risks around rare earth materials, and ongoing macroeconomic uncertainty. BofA now projects U.S. industry sales at 16.25 million units in 2025 and 16.9 million in 2026, with North American production expected at 15.75 million and 16.4 million units, respectively. Despite these near-term challenges, the analyst believes most of the pressures should ease by late 2025 or early 2026. The revised target on Sonic Automotive reflects this measured optimism, incorporating the expected normalization of conditions over the medium term. Sonic Automotive Inc. (NYSE:SAH) is one of the largest automotive retailers in the United States. Its services include the sale of both new and used cars and light trucks, sales of replacement parts, vehicle maintenance, warranty services, paint and repair services, and other aftermarket services. While we acknowledge the potential of SAH as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: and 10 Best Tech Stocks to Buy According to Billionaires. Disclosure: None.
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Time Magazine
33 minutes ago
- Time Magazine
What to Know About ‘Transshipping' and U.S. Trade Deals
A U.S. and Vietnam trade deal has been reached that means Vietnam will avoid the most severe tariff rates—set to go back up next week—but there's a catch that could anger Vietnam's largest trading partner, China. The deal, announced Wednesday, will mean Vietnamese exports to the U.S. are tariffed at a 20% rate—lower than the initial 46% 'reciprocal' tariff announced in April, but double the 10% universal tariff. Goods that are deemed to be transshipped, however, will be tariffed at a 40% rate—a policy that seems aimed at China which has used the method to get around U.S. levies. Transshipping involves transferring cargo from one vessel to another while in transit to the destination country and is often done to disguise a product's country-of-origin in order to illegally skirt import levies. In return, Vietnam agreed to drop all tariffs on U.S. imports, President Donald Trump said. 'In other words, they will 'OPEN THEIR MARKET TO THE UNITED STATES,' meaning that, we will be able to sell our product into Vietnam at ZERO Tariff,' the President posted on Truth Social on Wednesday morning. At the heart of Trump's deal with Vietnam—and his talks with other major trading partners—has been an effort to counter what he sees as China's unfair trade practices. Trump's trade adviser Peter Navarro called Vietnam 'essentially a colony of communist China' in an April interview on Fox News while describing how nontariff barriers, including Chinese transshipments, contribute to U.S. trade deficits. 'Vietnam sells us $15 for every $1 that we sell them and about $5 of that is just Chinese product that comes into Vietnam, they slap a 'Made in Vietnam' label on it and they send it here to evade the tariffs,' he said. The higher tier of tariffs on transshipments will impact goods that have components originating in one country, such as China, but are routed through Vietnam then exported to the U.S. China supplies much of the components and raw materials to Vietnam and other Asian countries that are then used to make finished goods, but it also ships some finished goods through Vietnam or mostly finished goods that go through a minimal final assembly in Vietnam with their county-of-origin misrepresented as Vietnam, which is considered illegal. But restrictions on transshipments could tick off China, which is a larger trading partner for most Asian countries than the U.S. Here's what to know about what the deal means for Vietnam and China. What does the deal mean for Vietnam? Vietnam has been keen to be on Trump's good side since he announced his 'reciprocal' tariffs in April. Vietnam was the sixth-largest importer to the U.S. last year, supplying almost $137 billion worth of goods and fuelling a $124 billion trade surplus with the U.S.—the third largest trade gap with the U.S. after China and Mexico. The country's share of imports to the U.S. was bolstered during Trump's first term, when trade tensions with China pushed firms to move production to Southeast Asia. Vietnamese officials have been in talks with the Trump Administration for weeks and even signed deals to purchase more American goods ahead of Thursday's trade agreement. The country has promised to buy more aircraft, liquefied natural gas, and agricultural products from the U.S. Vietnamese officials have also backed the Trump Organization's plans for a $1.5 billion luxury resort and golf club development outside Hanoi. Vietnam's agreement, according to Trump, to remove all levies on U.S. imports is indicative of the country's push to maintain close trading ties with the U.S., even as Trump has retreated from the relationship in other areas, such as through the shuttering of USAID. Trump boasted that the zero tariffs will drive sales of American SUVs in Vietnam, although an American-made car, even with no duties, may still be more expensive than cars produced elsewhere, and it's not clear how much domestic demand there is for American cars. Vietnam also pledged to crack down on fraud and illegal transshipments even before the deal was cut. Thailand, South Korea and Taiwan have also implemented or stepped up similar measures since April. The U.S.-Vietnam deal, however, does not currently address industry-specific tariffs, including a 25% tariff on cars and auto parts and a 50% tariff on steel and aluminium, that are subject to pending Commerce Department investigations. It could also still dampen Vietnam's economy: Bloomberg Economics estimates that Vietnam could lose a quarter of its exports to the U.S. in the medium term under the deal, affecting more than 2% of its annual economic output. How does China use transshipments? The higher tariff on transshipments indirectly targets Chinese exports. China has routed its goods through other countries, including Vietnam, to bypass U.S. import levies, a practice that became more frequent during the U.S.-China trade war in Trump's first term. Earlier this year, ahead of Trump's tariffs in April, Chinese exports to Vietnam and Thailand rose sharply, which Brookings analysts suggest is unlikely to reflect a rise in domestic demand in those countries and is instead more likely to reflect transshipments to the U.S. Chinese shipments to Southeast Asian rerouting hubs like Vietnam, Malaysia, Indonesia and Thailand, also surged shortly before trade talks between China and the U.S. in May even as direct exports from China to the U.S. fell—suggesting that China was able to continue its flow of goods to the U.S. through transshipments even as countries touted crackdowns. It's too soon to tell how effective the transshipment clause and other measures will be in cracking down on fraud. 'While the exact criteria for defining transshipment remain unclear, it is evident that Vietnam's role as a potential connector for Chinese exports to the U.S. will diminish,' Su Yue, Principal China Economist at the Economist Intelligence Unit, told the South China Morning Post. But some experts say at least some businesses may be willing to take the gamble, especially if the benefit of manufacturing in China outweighs the risk of getting caught. 'The thing about trade is when there are huge arbitrage opportunities, people are going to find a way to take advantage of them, legally or illegally,' Caroline Freund, an expert on international trade at the University of California at San Diego, told the Washington Post in May. 'It's like a river. You can keep putting rocks in, but the water's going to keep flowing down.' Ash Monga, who runs China-based supply chain management company IMEX Sourcing Services, tells TIME that in the wake of Trump's tariffs, he noticed a rise in Chinese companies offering 'Delivered Duty Paid' fraud services to U.S. importers, which involves underpricing goods in order to pay a lower duty. Suppliers in China would set up shell companies that would act as the 'importer of record,' creating the perception among U.S. importers of lower risk. (Monga cautions that U.S. customs can still go after the U.S. businesses purchasing the goods from China and it can carry severe penalties.) 'They are doing it because people are looking for solutions to lower the tariff,' Monga says. 'Businesses were at risk of not surviving so they were desperate to find any solution' even if those solutions are fraudulent. China sees move as attack on interests 'The looming question now is how China will respond,' Bloomberg Economics analyst Rana Sajedi wrote in a research note. 'Beijing has made clear that it would respond to deals that came at the expense of Chinese interests and the decision to agree to a higher tariff on goods deemed to be 'transshipped' through Vietnam may fall in that category.' China vowed that it will retaliate if its interests are hurt by the U.S.-Vietnam trade deal. 'We are happy to see all parties resolve trade conflicts with the U.S. through equal negotiations but firmly oppose any party striking a deal at the expense of China's interests,' Chinese Commerce Ministry spokesperson He Yongqian said at a Thursday press conference, reiterating earlier comments warning countries against signing deals with the U.S. that shut out China. 'If such a situation arises, China will firmly strike back to protect its own legitimate rights and interests.' On top of that, China will likely view the relatively lower 20% tariff on Vietnamese goods as an effort to encourage firms to produce their goods in Vietnam over China. The U.S. and China said they reached a framework agreement in June that will set U.S. tariffs on Chinese imports at 55% and Chinese tariffs on U.S. imports at 10%, alongside other export controls. 'The 'China quotient' in U.S. negotiations with other Asian economies is arguably evident in the deal with Vietnam,' Vishnu Varathan, macro research head for Asia at Mizuho, wrote in a Thursday note. 'The U.S.'s intent is quite obviously to not disincentivize Vietnam's role as a substitute for China at a lower 20% tariff.' Vietnam may soon find itself caught in a balancing act between two economic superpowers. Varathan wrote: 'Other Asian economies will be particularly vulnerable to a two-sided geoeconomic squeeze given that their reliance on both China and U.S. are significant.' And some experts suggest that the U.S. wants to go beyond stopping illegal transshipments—it wants to shut China out of global supply chains entirely. The U.S. has also been in talks with India that could involve an agreement requiring a higher minimum amount of a product's value to be added locally in order to qualify as 'Made in India'—the U.S. is asking for that amount to be 60%, while India wants to bring it down to around 35%. The U.K. also signed a trade deal with the U.S. in June that included commitments around export controls that could encourage British firms to exclude Chinese products from their supply chains. China's foreign ministry criticized the move, telling the Financial Times: 'Co-operation between states should not be conducted against or to the detriment of the interests of third parties.' 'The United States seems to be arguing that anything that comes from China is by default transshipment, so you tar and feather every single product that comes from China,' Deborah Elms, the head of trade policy at Asia-based global trade research organization, the Hinrich Foundation, told the New York Times. 'Asian governments are being asked to redefine supply chains to something that might be decades in the making in exchange for what? It's a little unclear.'
USA Today
42 minutes ago
- USA Today
Republicans passed the 'big, beautiful bill.' Will it come back to haunt them?
Congress passing President Trump's sweeping tax policy bill will have massive consequences for both parties in the 2026 midterm elections. WASHINGTON – President Donald Trump's legislative package of tax reductions and Medicaid cuts passed out of Congress on July 3 and will soon be signed into law. Up next for Congressional Republicans: Surviving the midterms. Many Republicans argue that voters will feel the economic benefits of their bill and reward them by sending them back to Washington. Democrats say the bill is deeply unpopular and they'll use it to clobber the GOP in the November 2026 election. History, in this case, favors the Democrats' argument. The party that does not hold the White House typically wins the House in the midterm elections as voters express frustrations with the new president's policies. This trend applies regardless of party in modern history, with some exceptions. And public polling about the Republican bill already indicates voters aren't thrilled about it. A Fox News poll published in mid-June found 38% of respondents favored the legislation and 59% opposed it. Polls from Quinnipiac, The Washington Post, KFF and Pew reflected similar sentiments. "This will cost Republicans the House," said Rep. Suzan DelBene, D-Washington, chair of the Democratic Congressional Campaign Committee, which is responsible for helping Democrats keep and win House seats. Democrats have their 'script' for 2026 The bill's Medicaid cuts are expected to leave 11.8 million Americans without insurance over the next ten years – a deeply "damaging" result that will drive up healthcare costs for families, DelBene said. Democrats have likened this bill to Republicans' 2017 attempt to repeal the Affordable Care Act, after which Republicans lost 40 seats in the House. "People want representatives that are going to stand up for them," she argued, "and this bill is an example of Republicans turning away from their constituents." Republicans have "written the script" for 2026, said Rep. Jamie Raskin, D-Maryland. 'I'm certainly going to be talking about it all of the time,' he told USA TODAY. 'I mean, nothing could better capture the way that the Republican party just serves Donald Trump and our would-be monarchs and oligarchs.' It's not just Democrats who have identified the Medicaid cuts as a potential political threat. During a meeting with House Republicans on July 2, as GOP leadership scrambled to find the votes for the package, Trump said they shouldn't touch three things if they wanted to win elections – Medicaid, Medicare and Social Security, according to the news site NOTUS. One member reportedly responded: "But we're touching Medicaid in this bill." Campaigning after Medicaid cuts Rep. Don Bacon, R-Nebraska, represents a swing district and recently announced he plans to retire from Congress. He has been a vocal opponent of the Medicaid cuts in the bill, but he said before the vote that he would approve the measure because it would save the average Nebraskan $141 per month in taxes and pour billions into the defense budget. Bacon said he believes the Senate's version, which implemented deeper cuts to Medicaid, makes it easier for Democrats to paint the package in a negative light during the midterm elections. "I could have defended the House bill every day. It was easy," he said. "But in the end, do I want to raise taxes on the middle class? No. Do I want to fix defense? Yes." Some Republicans are confident they can explain their reasoning to voters, including those who raised concerns about Medicaid cuts. Rep. Jeff Van Drew, R-New Jersey, argued before the vote that his concerns were allayed by provisions in the bill that would allow hospitals in his district to continue to draw down sufficient federal funds. "I've said all along that we have to do this in an intelligent way. I believe that it seems we've charted a way to do that. Where we started a few months ago, people were saying we're going to gut Medicaid. We're a long ways off from that." GOP confident tax breaks will carry them House Majority Leader Steve Scalise, R-Louisiana, said he believed the bill would prop up Republicans in the 2026 midterm elections. "Every Democrat (in the) House and Senate voted no," Scalise said on July 3. "The American people are going to see great benefits from this bill, and they're going to know which party was fighting for them and which party was literally trying to hold up the vote for hours so that those families couldn't get that relief." "The Democratic Party still doesn't know why they lost in November. They're going to be reminded of that next year when they lose again," he added. The bill makes permanent the 2017 income tax cuts implemented during Trump's first term and pours $170 billion in border security funding. In a memo on the bill, the National Republican Congressional Committee indicated it plans to argue Republicans prevented "the largest tax hike in generations" and delivered a historic funding boost for border security. 'This vote cemented House Democrats' image as elitist, disconnected, snobby, unconcerned with the problems Americans face in their daily lives, and most of all – out of touch," Mike Marinella, NRCC spokesman, said in a statement. "House Republicans will be relentless in making this vote the defining issue of 2026, and we will use every tool to show voters that Republicans stood with them while House Democrats sold them out.'
CNN
an hour ago
- CNN
Why the GOP doesn't want you biking to work but will spend millions on a ‘heroes' sculpture garden
The Republican tax and spending bill is 900 pages of barely readable text full of complicated proposals that would, among many other things, slash the social safety net in America and lavish wealthy households with tax cuts. It is reviled on the left for hurting poor people and reviled on the far-right for not going far enough to cut spending. It's a hard pill to swallow for lawmakers across the political spectrum, which is why it's loaded up with super niche provisions that reflect some of the ideological contradictions within the Trump coalition. Like, killing the $2 billion 'qualified bicycle commuting reimbursement,' a relatively cheap incentive that, at least in theory, would align with the 'Make American Healthy Again' sect of Trump loyalists. The benefit was suspended in Trump's first term, but before then it allowed employers to offer workers a $20 a month tax-free reimbursement for biking to work. (Healthy! Good for the environment!) The GOP package in Congress would eliminate it for good. There's also $40 million earmarked for a 'National Garden of American Heroes' — 250 life-size sculptures that Trump wants completed in the next 12 months ahead of the nation's 250th anniversary. The ambitious project is a longtime Trump vision that, according to Politico, will be almost impossible to pull off in time without the help of foundries in China. Incidentally, the money for the sculpture garden would be directed to the National Endowment for the Humanities, a government agency that Trump has been trying to eliminate since his first term. The NEH recently laid off 2/3 of its staff, canceled more than 1,000 grants and is marshaling its remaining resources to focus on next year's anniversary. These seemingly arbitrary small items are essentially sweeteners to win over lawmakers who might quibble with the broader thrust of the legislation. 'Now that we essentially do policy-making at a large scale, through these huge mega-bills in reconciliation… you have to stuff everything that you possibly can to try to get your entire coalition on board, particularly within the margins,' said Alex Jacquez, chief of policy and advocacy at Groundwork Collaborative, a progressive think tank. 'So that's where you see a lot of these, 'huh, where did that come from?' items.' The clearest example of that is the litany of carve-outs for the state of Alaska and its 740,000 residents, known by some critics as the Kodiak Kickback. (Fun fact: 'Alaska' shows up in the text of the Senate bill more than 20 times; other states, if they're mentioned at all, show up fewer than four times.) The reason for all the Alaska love is simple: As GOP leaders drummed up support, it became clear that Sen. Lisa Murkowski would be a holdout because of the bill's expanded Medicaid work restrictions and changes to federal food assistance programs. Over the weekend, staffers scrambled to rewrite key pieces of the bill to win her support, my CNN colleagues reported. As a result, Murkowski locked in several Alaska-specific breaks, including a tax deduction for meals served on fishing vessels, a special tax exemption for fishing villages in the western part of the state, and a five-fold expansion of a deduction for whaling boat captains. Like the commuter cycling reimbursement that the bill would eliminate, these aren't big-ticket items. But they illustrate the haphazard and at times punitive way government spending decisions get made. On the cycling benefit, Jacquez says it is likely just a target for Republicans who see it as a culture war issue — a 'green' activity that largely benefits people in cities who tend to vote for Democrats. You can see that dynamic play out in other provisions, too. Republicans have tried to shield some of their rural constituencies from the worst effects of the bill, Jacquez notes. There is a rural hospital bailout fund designed to blunt the impact of Medicaid cuts, for example. But that doesn't do anything to help urban hospitals in New York City, where some 4 million residents, nearly half the population, are enrolled in Medicaid. In the grand scheme of a $3.3 trillion spending package, $150 million for America's birthday might seem fine. 'But that's $150 million that's not going to be spent on food assistance,' Jacquez said. 'Or it's a billion dollars that's not going to be spent on Medicaid. When every cent allegedly matters, these things do add up.'
