For some, tariff “is the most beautiful word in the dictionary.” But not for all. Beauty is in the eye of the beholder.
Below is a table that summarizes the tariffs that have been announced so far (courtesy of Apollo) along with their corresponding dates of implementation:
A month ago, President Trump announced that he would impose sweeping tariffs on imports from Canada, Mexico, and China. Soon after, a last-minute deal was reached to delay the Canada and Mexico tariffs for 30 days.
During the first week of March, when the tariffs were scheduled to come into effect, the tariffs on Canada and Mexico were watered down with a 30-day reprieve for automakers.
Also, broader exemptions for other products that are imported from America’s neighbors were permitted after lobbying from business groups that warned of rising prices.
This fluid situation around tariffs may be a feature stemming from the administration’s approach to negotiation, and the backtracking could be a realization that tariffs likely will cause domestic production and supply disruptions, push up inflation, and weigh on economic growth.
The administration’s main economic goals of applying tariffs appear to be to:
- address unfair trade practices
- correct significant trade imbalances
- rebuild the US manufacturing sector
And trade policy that relies on tariffs as a cornerstone is high risk.
In a recent article, JP Morgan Asset Management’s Chief Global Strategist highlighted that tariffs have undesirable consequences including that they:
- Raise prices
- Slow economic growth
- Cut profits
- Increase unemployment
- Worsen inequality
- Diminish productivity
- Increase global tensions
Economists at major banks and research firms have begun to increase the odds that more tariffs will be implemented (and not just threatened) and applied for longer.
On Monday, March 10 the chief economist at Goldman Sachs published a report that factors in new, more adverse trade policy assumptions. He made a significant downgrade to his US growth forecast for 2025 (by nearly 1 percentage point) – though he still expects the US economy to expand this year.
Moody’s Analytics has estimated that if the US were to impose universal tariffs on all goods entering America, it could slow US economic growth by 3 percentage points by 2026, which likely would push the economy into a recession.
At this point, I don’t believe a tariff-induced US recession is the likely outcome, in part because tariffs still appear to be more malleable than ironclad, but also because the US economy has proven to be resilient and remains on a sound economic footing.
But it’s also quite possible that continued tough talk toward trading partners coupled with policy action that sticks will bite. A meaningful slowdown in the quarters ahead may be in the cards as well as more unsettling moves in stocks.
For all investors, holding to a stress-tested financial plan with an appropriate investment strategy and asset-allocation target is the time-tested way to weather financial market swings, irrespective of what headline or new development is causing the volatility.
And specifically for retirees who depend on portfolio withdrawals, verifying that enough cash is on hand to avoid having to sell stocks if stock volatility persists for an extended period, is always good practice.
-RK