Tariffs! Should You Be Concerned?

Tariffs! Should you be Concerned?

Following the presidential election, a key topic is the potential increase in tariffs on goods produced outside the U.S., sparking concern among investors about its impact on the markets.

Unless you’ve been out of the loop, you’ve likely come across recent news about ongoing tariff talks between the U.S., Canada, and Mexico.

Let’s break down tariffs and how they work:

What are tariffs? A tariff is essentially a tax on imported or exported goods. Governments impose tariffs as a way to regulate trade, either to protect domestic industries or to achieve foreign policy objectives.

Who pays the tariff?

• The importing business is responsible for paying the tariff to its home country’s government.

• Foreign companies do not directly pay the duties.

How do tariffs work?

• Ad valorem tariffs: A percentage of the value of the imported goods.

• Specific tariffs: A fixed amount for each imported good.

• Tariff-rate quotas: A tariff that increases once a certain amount of imports is reached.

  
  
  
  

Why are tariffs used?

• To protect domestic industries

• To advance foreign policy goals

• As leverage in trade negotiations

  
  

A useful point of reference for understanding tariffs is President Trump’s first term. Beginning in 2017, his administration targeted China, and by 2018, imposed tariffs on a wide range of products.

Over the next few years, trade discussions between the U.S. and China continued, eventually leading to an agreement, though existing tariffs remained in place. Despite the uncertainty surrounding this, both China and the U.S. delivered higher cumulative returns than the MSCI World ex USA Index during Trump’s tenure.

Markets are forward-thinking, and the economic effects of measures like tariffs are likely already factored into current prices. When such anticipated developments unfold, their impact on markets may be less significant than expected.

Should You Be Concerned About Tariffs?

Have questions about how tariffs might affect your investment portfolio? Reach out to Financial Plan Providers today. We are a boutique financial advisory and wealth firm with over 15 years of experience helping clients navigate volatile markets. To learn more about our investment approach, contact us for a consultation. Our experienced advisors are ready to help you create a personalized financial plan to achieve your goals.

Schedule a conversation with us today.

-------------------------------------------------------------------------------------------------------------------------

Disclosure: The content provided by Financial Plan Providers LLC is for informational purposes only and should not be considered financial, investment, tax, or legal advice. No guarantees are made regarding the accuracy, applicability, or completeness of the information. Opinions expressed reflect individual viewpoints and may change without notice. Investments carry risks, including potential loss of principal, and past performance does not guarantee future results. Charts, data, and references to securities are for illustrative purposes only and should not be relied upon for investment decisions. Financial Plan Providers LLC is a registered investment adviser and provides advisory services only where properly licensed or exempt. Always consult a qualified professional before making financial decisions.