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TARIFFS IN 2025:
Think of this like an additional ‘tax’ that’s collected when you import goods from one country to another. The theory is that, if imported goods become more expensive, it’ll encourage people to buy and manufacture locally, instead – or, if they don’t, then at least the country collects some additional revenue, in the process. This CAN be beneficial in four ways:
First: They protect US Companies from Foreign Competition
Second: Increased Job Growth
Third: Higher Government Revenue
Fourth: Favorable Trade Negotiations
RECIPROCAL TARIFFS.
China went on record to “urge the United States to immediately lift tariffs, otherwise they vow retaliation.” Canada said – if we tariff them, they’ll tariff us. Europe is preparing for ‘countermeasures’ to take place, and we’re finding ourselves in a really volatile game to see which country gives in first.
WHEN TARIFFS DON’T WORK:
1828: Tariffs of 49% were implemented to protect US industrial products against competition from foreign imports. This led to the Nullification Crisis of 1832, which resulted in the reduction of tariffs when individual states argued they were unconstitutional.
1930: The Smoot-Hawley Tariff Act. The US was in a tough position of The Great Depression, where – unemployment was high and businesses were struggling. Tariffs were placed on goods to make American businesses stronger and prevent competition – but the opposite happened. That meant that people wound up paying more for the same materials than they did before, and – almost 100 years later – the Smoot-Hawley Tariff act was credited as making 1928 worse.
2025: The USA Is in a ‘Trade Deficit,’ the largest tariffs have been implemented in almost 200 years. This is causing the stock market to begin selling off.
MY THOUGHTS:
Tariffs CAN be useful in limited, niche situations for protecting certain US products and services – but, on a large scale, it seems like every piece of historical evidence suggests that – they’re a bad idea, they wind up raising prices and having a negative impact – on ALL income groups – and it’s best to allow the free market to do its thing.
HOWEVER, there IS something to be argued about using tariffs as a negotiation tool for more favorable trade deals with the rest of the world, knowing that – we have less to lose than everyone else. But then again: if the rest of the world bands together and refuses to back down – realistically, this is going to get very ugly…very quickly.
I think it’s going to be way more productive to focus on keeping your expenses low, making sure you earn a consistent income, and have a long term approach to the markets. From an investment standpoint, the stock markets best days usually happen during a bear market, when prices are down the most – and that happens after the worst days.
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