Minnesota businesses such as 3M enjoying an "up" economy

Tax cuts to corporations and low interest rates helping performances

Morning News
July 26, 2018 - 10:08 am

It's been a good 2018 so far for most Minnesota-based firms.  The "Trump economy" and it's tax cuts for corporations, along with still low interest rates from the Fed, has kept things moving upward.  There's been steady economical growth of two to two and a half percent and inflation is in what economists call the "goldilocks zone" of two to three percent.    

Not surprisingly, Minnesota firms are turning in some nice numbers.  Take 3M, which just turned in their 2nd quarter performance numbers:  revenue was up 7% and earnings (profits) were up 17%.  The growth was pretty much across all divisions and across US and overseas subsidiaries. 

In a confrence call this week, CEO Mike Roman said, "Our team delivered record sales and a double-digit increase in earnings per share, while keeping our commitment to investing in our business and returning cash to shareholders".  

Paul Vaaler is the John and Bruce Mooty Chair in Law & Business and the Carlson School of Management.  He talked to WCCO Radio's Dave Lee about 3M and other Minnesota businesses. 

"Take 3M's Industrial Division as an illustration. The Industrial unit, 3M's largest division, saw sales rise 6.8% to $3.1 billion. Industrial's solid performance served as further proof that 3M has largely recovered from sluggishness in growth due in part to low oil prices.  Well, oil is up benefiting oil producers in the US and Russia, and US industrial parts producers like 3M."

Vaaler did caution about some clouds in the current sunny numbers.  "Maybe in the automotive sector.  3M is looking for international growth in automotive parts, but the current trade war has seen threats of tariffs slapped on US automobiles.  That's not good for selling their parts."

However, in a story from Bloomberg Thursday, European carmakers suddently surged after President Trump agreed to put auto tariffs on hold.  Trump and European Commission President Jean-Claude Juncker agreed to declare a ceasefire in their trade spat while they negotiate lower barriers to transatlantic commerce.  In the biggest sign yet that a major trading partner can convince the U.S. to back away from a trade war, Juncker also said they would re-examine U.S. steel and aluminum tariffs and the retaliatory duties imposed by the EU.

“We had a big day, very big,” Trump said during a press conference with Juncker at the White House on Wednesday. “We are starting the negotiation right now, but we know where it is going.” Trump hailed “a new phase” of trade relations.

One advantage 3M could have in the tariff wars is that they are a multinational manufacturer.  3M can shift production overseas to avoid tariffs.  Said Vaaler, "It's part of their multinational corporate competitive advantage:  geographic flexibility."

(Bloomberg contributed to this story) 

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