Speaker 1: Hi, I'm Stacey Hyde and I'm back for another episode
of Better Financial Health in 15 minutes or less, and today
I'd like to talk a little bit about tariffs and about why they
are causing so much mayhem in the markets, causing prices to
rise, and how the stock market has reacted.
You know, negatively, positively, and what's going on,
and, as anything that might be said about future performance in
the market, I'm going to make some statements.
But I don't know, and, quite frankly, none of the talking
heads on TV or the radio or any podcast, instagram, tiktok,
nobody really knows.
It's all an educated guess, but what we've seen this week and
by this week I mean the week of April 21st through the 25th
we're sitting right in the middle of it.
As I record this, markets were down a lot on Monday and the big
sort of impetus for that was President Trump saying that he
was going to fire the Fed chairman, jerome Powell.
And the reason the markets reacted so negatively is the Fed
has always kind of operated independent of politics.
Yes, the Fed chairman is an appointed position, but then
they're really sort of insulated and they make policy decisions
based on a couple of things One, they're trying to maintain full
employment, and then they also are trying to prevent inflation
Because, as we are all very well aware right now, inflation
causes the cost of goods and services to cost more and your
savings to be worth less.
So inflation is generally bad when it comes to the cost of
goods, and so that's a dual mandate that the Fed has.
Prior to last year 2022, the Fed really focused on the full
employment mandate, especially coming out of COVID, and
inflation really got out of hand , quite frankly, and so the Fed
has been very disciplined.
Once they decided that it was a problem it wasn't just
temporary they got very aggressive about raising rates
and the Fed has continued, with inflation really picking up, has
really focused on that more, and that has angered the
administration because, with the tariffs, one of the concerns is
it's going to raise prices to consumers, because a lot of the
reason that things are imported from other countries or
manufactured in other countries is because they can be done less
expensively, even after factoring in shipping costs,
than if they were manufactured here in the US.
Or in some cases, they can't be manufactured here Think or not
currently and it would take many years to build the factories to
do it.
Think semiconductor chips, making clothing, that sort of
thing would be very difficult for those to be made in the US.
You also have sort of a friend I was talking to.
She imports food goods and she was saying that you know they
need a lot of little tangerines for school lunches and that sort
of thing.
She's like we can't grow enough of them here in the US and so
there's things like that.
Sometimes it's climate, sometimes it's just not enough
people to work the fields or enough real estate to plant as
many different crops as we need to grow the things we need to
consume and to have healthy diets.
So that factors into it as well .
So there's a lot of reasons that we don't get everything
from the US.
Do I think that it would be better if we did make more stuff
here?
Absolutely.
But if you look at the auto industry for one, many cars are
manufactured here, you know, put together.
We were just last week we were down in Mississippi and there's
a huge Nissan plant and they assemble a ton of Nissan cars,
which is a Japanese company but they're putting it together in
the US.
But pieces of that car, you know, components of the engine,
components of the seats, some of those are coming from Mexico,
some of them are coming from Canada and then they all come
together to make a finished product in the US, and so I
think that's where people have gotten understandably nervous
about we can't make all of these parts, and it made more sense
to sort of spread out our supply chain where we could do it the
lowest cost, because that, quite frankly, kept the cost to
consumers lower.
So that's really, I think, got the markets worried about
inflation and the Fed worried about inflation.
The administration wanted rates to be lower, because then that
keeps the perception of cost.
So the houses, like they were several years ago, the houses
might cost more, but because interest rates were lower, the
cost of financing it was lower.
So if costs go up and rates stay the same, payments continue
to go up and people are feeling the pinch, like most people are
right now.
So there's you've really had the administration at
loggerheads with the stock markets, which are, you know,
making reasonable guesses about what they expect to happen, and
also the Fed kind of looking out for all of us, trying to make
the best decisions they can, with imperfect information as
well, and so that angered the administration.
There was a threat, a perceived threat, by Trump to fire Mr
Powell and over the last couple of days he has walked that back
and said he's not going to do that.
The markets have reacted very favorably to that and they've
really kind of picked up if not almost all of their losses from
this week.
But we continue to be significantly down certain
sectors more than others this month, and understandably that's
got people worried.
Do we know how this is all going to play out ultimately?
No, some people guess that it's all a negotiating tactic.
Some people say that you know they're committed to it.
But what I personally hope happens is that it does spur
some companies to start doing more here.
But and maybe we have some very low tariff and we maybe exclude
our friends you know, like mexico and canada, that we share
a border with and where we have all benefited from some free
trade there and maybe add in some small tariffs on countries
that also charge tariffs to us and that could potentially be
seen as taking advantage of the US.
But I don't think these draconian, dramatic tariffs are
ultimately going to be good for the economy.
There's all kinds of different opinions out there about what
the negative consequences are going to be of that, but in all
cases, a tariff is another form of tax and ultimately, I believe
, it'll be paid by consumers consumers and so that is going
to raise the cost if they're not mitigated and mitigated soon,
because markets don't like uncertainty any more than you or
I do.
So I don't know that I've answered any of your questions,
other than just trying to lay out what's out there and why the
markets have reacted so crazily over the last few days and why
things tend to jump one way and then the other Markets are just
reacting or overreacting to news .
So try to stay calm.
Do not get caught up in the noise of the day-to-day, because
the way it's going right now it's likely to change tomorrow.
So, um, the old stickers used to say stay calm and carry on.
This has been another episode of better financial health in 15
minutes or less.