Weekend Read – Tariffs Tariffs Tariffs
03/18/2025I take pride in personally crafting each of these emails. Unlike many others in the industry who rely on prewritten content, I write these myself from scratch. My goal is to boil down complex concepts and share relevant news in an easy-to-understand format. I hope you find them both informative and enjoyable.
A while back, I wrote about tariffs, what they are, how they function, and the economic trade-offs they create. To quickly recap, a tariff is a tax on imported goods, but it’s important to be clear about who actually pays the tax. It is not the foreign country or company exporting the goods. Rather, it’s the American businesses importing them that pays the tax to the U.S. government. These businesses then have to decide whether to absorb the additional cost or pass it on to consumers in the form of higher prices.
While tariffs don’t directly charge foreign exporters, they do put pressure on them by making their products more expensive. In response, American businesses may seek out different suppliers, shift manufacturing, or reduce their overall demand for the affected products. Whether this results in lower demand depends on how essential the product is and how easily alternatives can be found.
Now, tariffs are back in the news, with President Trump enacting a sweeping set of new import taxes. Investors and businesses alike are trying to determine how these policies will impact inflation, trade relations, and corporate earnings and that uncertainty is likely a contributing factor to the recent market pull back.
Trump's Newly Implemented Tariffs and the Real Strategy Behind Them
As of March 4, 2025, Trump has enacted significant tariffs, officially citing the fentanyl crisis as the justification. A 25% tariff now applies to all imports from Canada and Mexico, with the exception of Canadian energy products, such as oil and electricity, which are subject to a reduced tariff rate of 10%. Meanwhile, the existing tariff on Chinese goods has been increased from 10% to 20%, with the administration arguing that China has not done enough to curb the production and distribution of fentanyl1.
While fentanyl is the stated reason, these tariffs are also likely part of a broader negotiating strategy. Trump has historically used tariffs as leverage to extract more favorable trade deals, and this move may be no different. By implementing sweeping import taxes, the administration is creating an incentive for these countries to come to the table and negotiate new terms on trade, manufacturing, and broader economic cooperation. The possibility remains that these tariffs are temporary bargaining chips rather than long-term policy shifts. At least that’s what I hope.
Market Reaction and Economic Concerns
The immediate market reaction has negative. Major stock indices have receded. While the pull back can’t entirely be attributed to tariffs, they’ve certainly played a role. Markets dislike uncertainty, and businesses are now grappling with the potential implications of these tariffs such as, higher costs, supply chain disruptions, and the risk of retaliatory measures. In response, Canada, Mexico and China have announced retaliatory tariffs2.
It would be reasonable to expect that these tariffs will affect the prices for a wide range of consumer goods, including food and automobiles, as businesses will likely pass on the added costs to consumers. Inflation, which the Federal Reserve has been working to bring under control, could see renewed pressure.
That said, I’ve seen a tendency for markets to overreact in the short term. If these tariffs are repealed, I’d expect markets to stage a sharp recovery, quickly reverting back to previous levels. While these headlines drive short-term volatility, long-term investors should focus on whether these policies actually take hold for an extended period or remain a temporary tool for negotiation.
How Trump’s First-Term Tariffs Played Out
To put this into context, we can look back at the tariffs Trump imposed during his first presidency. Between 2018 and 2019, he placed 25% tariffs on $250 billion worth of Chinese goods and imposed additional tariffs on steel, aluminum, and various European and Canadian imports. China retaliated with tariffs of its own, particularly on American agricultural products, leading to a prolonged trade war3.
The economic impact of these tariffs was mixed. The Congressional Budget Office (CBO) estimated they reduced the level of real GDP by roughly 0.5% and raised consumer prices by 0.5%. The CBO further projected that the tariffs would lower the level of real GDP by 0.1% annually if left over the following decade, as businesses adjusted their supply chains in response to the changing international trading environment4.
This suggested dynamic, supports the argument that while tariffs cause short-term disruptions, their impact fades as businesses adjust. Companies shift suppliers, relocate production, or find ways to absorb costs. Over time, the economy adapts, and the initial shock of tariffs is largely eliminated. However, we find ourselves living in the short-term, experiencing that disruption enthusiastically.
Then vs. Now: What’s Different?
Trump’s first-term tariffs were targeted, focusing on specific industries and primarily aimed at China. His new tariffs are far broader, affecting nearly all imports from Canada and Mexico and significantly raising tariffs on China. A 10% or 25% across-the-board tariff means an immediate increase in the cost to the importer of nearly everything imported, cars, electronics, clothing, and household goods, raising inflationary concerns at a time when the Federal Reserve is still working to bring inflation under control.
However, given Trump’s history of using tariffs as a bargaining tool, it wouldn’t be surprising if these new measures are scaled back once negotiations play out. If that happens, the initial panic in markets could quickly reverse, rewarding those who stayed patient rather than reacting emotionally to the headlines. Let’s cross our fingers that’s the case.
The Bottom Line
Markets are forward-looking, and right now, they are trying to price in the potential effects of these sweeping tariffs. The coming months will be crucial in determining whether these policies will persist, escalate, or be eliminated, and how businesses, consumers, and investors will respond. Fun times.
If you’ve only recently joined my email list, you’ve missed out on many insights and updates that I've been sharing each week. Be sure to visit my blog to explore past content that you might find valuable.
As always, if you have any questions or concerns, I’d be happy to discuss how these developments may impact your financial strategy. Feel free to reach out by phone or email.
Jeremy Raffer, MBA
Director & Wealth Manager
Author “Financial Planning for Widows”
m. 201-747-2705
w. rafferwealthmanagement.com
e. [email protected]
Steward Partners
115 W. Century Rd, Suite 145
Paramus, NJ 07652
1https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-imposes-tariffs-on-imports-from-canada-mexico-and-china/
2https://www.reuters.com/world/trade-wars-erupt-trump-hits-canada-mexico-china-with-steep-tariffs-2025-03-04/
3https://en.wikipedia.org/wiki/Economic_policy_of_the_first_Donald_Trump_administration
4https://crsreports.congress.gov/product/pdf/R/R45529/7
The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.
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A while back, I wrote about tariffs, what they are, how they function, and the economic trade-offs they create. To quickly recap, a tariff is a tax on imported goods, but it’s important to be clear about who actually pays the tax. It is not the foreign country or company exporting the goods. Rather, it’s the American businesses importing them that pays the tax to the U.S. government. These businesses then have to decide whether to absorb the additional cost or pass it on to consumers in the form of higher prices.
While tariffs don’t directly charge foreign exporters, they do put pressure on them by making their products more expensive. In response, American businesses may seek out different suppliers, shift manufacturing, or reduce their overall demand for the affected products. Whether this results in lower demand depends on how essential the product is and how easily alternatives can be found.
Now, tariffs are back in the news, with President Trump enacting a sweeping set of new import taxes. Investors and businesses alike are trying to determine how these policies will impact inflation, trade relations, and corporate earnings and that uncertainty is likely a contributing factor to the recent market pull back.
Trump's Newly Implemented Tariffs and the Real Strategy Behind Them
As of March 4, 2025, Trump has enacted significant tariffs, officially citing the fentanyl crisis as the justification. A 25% tariff now applies to all imports from Canada and Mexico, with the exception of Canadian energy products, such as oil and electricity, which are subject to a reduced tariff rate of 10%. Meanwhile, the existing tariff on Chinese goods has been increased from 10% to 20%, with the administration arguing that China has not done enough to curb the production and distribution of fentanyl1.
While fentanyl is the stated reason, these tariffs are also likely part of a broader negotiating strategy. Trump has historically used tariffs as leverage to extract more favorable trade deals, and this move may be no different. By implementing sweeping import taxes, the administration is creating an incentive for these countries to come to the table and negotiate new terms on trade, manufacturing, and broader economic cooperation. The possibility remains that these tariffs are temporary bargaining chips rather than long-term policy shifts. At least that’s what I hope.
Market Reaction and Economic Concerns
The immediate market reaction has negative. Major stock indices have receded. While the pull back can’t entirely be attributed to tariffs, they’ve certainly played a role. Markets dislike uncertainty, and businesses are now grappling with the potential implications of these tariffs such as, higher costs, supply chain disruptions, and the risk of retaliatory measures. In response, Canada, Mexico and China have announced retaliatory tariffs2.
It would be reasonable to expect that these tariffs will affect the prices for a wide range of consumer goods, including food and automobiles, as businesses will likely pass on the added costs to consumers. Inflation, which the Federal Reserve has been working to bring under control, could see renewed pressure.
That said, I’ve seen a tendency for markets to overreact in the short term. If these tariffs are repealed, I’d expect markets to stage a sharp recovery, quickly reverting back to previous levels. While these headlines drive short-term volatility, long-term investors should focus on whether these policies actually take hold for an extended period or remain a temporary tool for negotiation.
How Trump’s First-Term Tariffs Played Out
To put this into context, we can look back at the tariffs Trump imposed during his first presidency. Between 2018 and 2019, he placed 25% tariffs on $250 billion worth of Chinese goods and imposed additional tariffs on steel, aluminum, and various European and Canadian imports. China retaliated with tariffs of its own, particularly on American agricultural products, leading to a prolonged trade war3.
The economic impact of these tariffs was mixed. The Congressional Budget Office (CBO) estimated they reduced the level of real GDP by roughly 0.5% and raised consumer prices by 0.5%. The CBO further projected that the tariffs would lower the level of real GDP by 0.1% annually if left over the following decade, as businesses adjusted their supply chains in response to the changing international trading environment4.
This suggested dynamic, supports the argument that while tariffs cause short-term disruptions, their impact fades as businesses adjust. Companies shift suppliers, relocate production, or find ways to absorb costs. Over time, the economy adapts, and the initial shock of tariffs is largely eliminated. However, we find ourselves living in the short-term, experiencing that disruption enthusiastically.
Then vs. Now: What’s Different?
Trump’s first-term tariffs were targeted, focusing on specific industries and primarily aimed at China. His new tariffs are far broader, affecting nearly all imports from Canada and Mexico and significantly raising tariffs on China. A 10% or 25% across-the-board tariff means an immediate increase in the cost to the importer of nearly everything imported, cars, electronics, clothing, and household goods, raising inflationary concerns at a time when the Federal Reserve is still working to bring inflation under control.
However, given Trump’s history of using tariffs as a bargaining tool, it wouldn’t be surprising if these new measures are scaled back once negotiations play out. If that happens, the initial panic in markets could quickly reverse, rewarding those who stayed patient rather than reacting emotionally to the headlines. Let’s cross our fingers that’s the case.
The Bottom Line
Markets are forward-looking, and right now, they are trying to price in the potential effects of these sweeping tariffs. The coming months will be crucial in determining whether these policies will persist, escalate, or be eliminated, and how businesses, consumers, and investors will respond. Fun times.
If you’ve only recently joined my email list, you’ve missed out on many insights and updates that I've been sharing each week. Be sure to visit my blog to explore past content that you might find valuable.
As always, if you have any questions or concerns, I’d be happy to discuss how these developments may impact your financial strategy. Feel free to reach out by phone or email.
Jeremy Raffer, MBA
Director & Wealth Manager
Author “Financial Planning for Widows”
m. 201-747-2705
w. rafferwealthmanagement.com
e. [email protected]
Steward Partners
115 W. Century Rd, Suite 145
Paramus, NJ 07652
1https://www.whitehouse.gov/fact-sheets/2025/02/fact-sheet-president-donald-j-trump-imposes-tariffs-on-imports-from-canada-mexico-and-china/
2https://www.reuters.com/world/trade-wars-erupt-trump-hits-canada-mexico-china-with-steep-tariffs-2025-03-04/
3https://en.wikipedia.org/wiki/Economic_policy_of_the_first_Donald_Trump_administration
4https://crsreports.congress.gov/product/pdf/R/R45529/7
The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results.
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