How US Tariffs Could Impact Your Financial Goals

How US Tariffs Could Impact Your Financial Goals | Retire Early, Retire Now

The latest news on U.S. tariffs has many professionals and high-income earners asking: How will this impact my investments, retirement, and financial future? In this episode, Certified Financial Planner Hunter Kelly explains how tariffs work, their historical role in the U.S. economy, and the potential pros and cons for your portfolio, inflation, and overall market stability. Whether you're an investor, business owner, or just want to stay informed, this episode provides clear, actionable insights to help you navigate economic uncertainty.

🔹 Enjoying the podcast? Follow Retire Early, Retire Now and leave a ⭐⭐⭐⭐⭐ review!
🔹 Want a personalized financial strategy? Book a free consultation at PalmValleyWM.com

#FinancialPlanning #Investing #USPolitics #MarketTrends #Retirement #EconomicNews #CFP

Check out the Palm Valley Wealth Management Website
PalmValleywm.com

Check us out on
Instagram
LinkedIn
Facebook
Listen to the Podcast Here!
Apple
Spotify

Transcript

0:00

Welcome back to retire early retire now. The podcast where we break down financial topics that matter most to high income earners. And professionals like you, I'm hunter, Kelly, owner, Palm valley, wealth management, and certified financial planner. Today we're diving into a topic that has shaped the us economy for centuries, and that is us tariffs. You probably heard in the news recently. Uh, politicians are debating them. Trump wants the applies here. Everybody. Uh, you've seen the headlines, Trump. Uh, the trade wars are beginning. And so I wanted to cover, Hey, how is that going to affect you day to day? Uh, what are tariffs actually do? How do they work? What's some pros and cons. And so we'll break down those pros and cons, how tariffs, uh, impact different sectors. In what it means for your financial situation or financial future. But first let's take a step back and understand. Uh, what tariffs are and then how, uh, they have played a major role in us history, because I think that will help us. Move forward. Um, and. Deciding if tariffs are a good thing or not, and I'm not here to tell you if they're good or not, you can decide that, but I do want to give you the information. Um, so that you can make better decisions about your spending and saving and kind of preparing for these tariffs or do they even really matter to you? Right. Um, and so. Uh, this would be a good topic today to talk about. Um, since it's heavy in the news and potentially, uh, maybe on your mind worrying about your financials decision, but before we jump into that, go ahead and like, and subscribe to my YouTube channel hunter, Kelly CFP. And if you're listening to this on your podcasting app, leave a five star review and share this with a friend. Um, but what are tariffs? And let's talk about their history. Uh, so, uh, tariffs are essentially just a tax that the government places on imported goods. So whenever a foreign country wants to sell a product to the U S a I E or Amazon items that you buy, things that are made in China, things that are made in Canada, Mexico, anywhere abroad. Uh, the government will charge a fee, which makes those goods more expensive. So, uh, the idea behind those tariffs are that because those products will become more expensive. It'll incentivize Americans to buy American made products instead of those imports. So hopefully helping the U S economy, helping drive more jobs, helping us to produce and manufacture those items here. Uh, domestically right. But what many people don't realize that. Terrace, uh, we're once the backbone of the us government finances is how they produce most or all of their revenue was through tariffs, not through income tax. Um, and so before income tax, even. It's existed. The vast majority of the revenue. Was through important goods. Um, and so we can kind of dive into that really quickly. This is not going to be a super long. And in depth podcast on the, the history of terrace, but maybe it will be good to know. Uh, where they came from when they started and then how they're kind of impacting us today, who are potentially here in the near future with potentially the Trump administration. Administration adding a more tariffs onto. Uh, different countries around us. Right. And so the early days, uh, one of the. Uh, first major laws that were passed was the tariff act of 1789. Um, which impose tariffs on imports that, uh, help pay off war debt, support, federal operations. Um, and so, like I said earlier, Um, tariffs were the main source, if not all of the source of us federal government revenue to help with those certain things. And so as history went on, um, We continue to apply tariffs. Uh, for different reasons, mainly because, uh, the us government thought this would help. Uh, increase the manufacturing ability for Americans because those products would be cheaper. Uh, they want it to protect those American jobs. Uh, so they would, uh, artificially or, um, Add tariffs to imports so that, uh, the British imports wouldn't, uh, necessarily come in and be cheaper and give them, uh, more, more power, essentially more money, right. More revenue to them. And so, uh, the shift from these tariffs type. Uh, taxes. Uh, became more toward free trade in the 1940s. Post-war to the U S. Us shifted toward a free trade, um, policies. Right. And so they started, uh, taking these tariffs off. We started, uh, Uh, taxing American incomes versus using, uh, tariffs as the main income source, uh, or revenue source for the U S government. And so that has been more prevalent over. Uh, the last handful of decades and now, uh, as we move toward the present. Obviously the last time Trump was an office. Uh, he raid waged a tariff war essentially on China. Um, where they impose tariffs on a lot of important goods. Um, and now he's starting to do sort of the same thing with Canada, Mexico, and China as well. And so the idea is that he wants to. Uh, make, uh, American products more affordable, right? And again, I'm not here to say, uh, if that's going to work or not, that's something for the American people and you to decide. Um, but, uh, I am going to take it from a standpoint of, he is trying to help Americans. You can decide, uh, if, if that's something he's actually doing or not. Right. And so. Um, what are some pros of terrace? Right? So now that we know what tariffs are, we have a little bit of history, right? As the us is imposing taxes on imported goods. Uh, what are the pros of that? Right. So one of the biggest arguments in favor of tariffs is that, uh, they protect American jobs. If foreign goods are more expensive, people are more likely to buy something. Uh, and in domestic or by domestic products. Right. So take, for example. The steel and aluminum industries, when the us imposes, uh, import it. Uh, tariffs on imported steel. Uh, or aluminum. American producers. Uh, we'll see more. Uh, demand because there still is cheaper now. Right. Or, um, There, there still is cheaper. And so that means potentially more jobs will be created over the longterm. Uh, because there's more demand, they have to produce more steel, so on and so forth. Right? So if you're an investor, this also means that if these companies are becoming more in demand, more profitable, generate more revenue, then uh, those stock prices will rise as well. So that can potentially help your stock portfolio. Right. Um, but as we'll discuss later, there are some unintended consequences. Um, another pro tariffs. Uh, can make it more attractive for companies to manufacture goods in the U S instead of outsourcing, uh, those cheap labors. Right? So this can lead to new new investments for America. Uh, American factories or infrastructure, for example, when tariffs were placed on. China. Solar panels, Chinese solar panels at boosted domestic solar manufacturing. Right? So we make those Chinese solar panels more expensive. Oh, now if there's still a demand for those solar panels, uh, it would make it more cost effective to produce those here locally in the U S. Um, and so. Uh, it can help reduce dependence on for, uh, foreign supply chain issues. And that's something that we saw in 2020. Uh, when COVID hit and we need it. Medical supplies and other, uh, types of supplies in the supply chain got a lot out of whack. Um, been to. Too dependent on another country. Uh, can have its downfalls. And so, uh, having a healthy balance of, uh, us manufacturing and potentially, uh, foreign manufacturing, uh, seems like the best, uh, Best bet in my mind, at least. Um, so that we're not relying on other countries for certain things. Um, but. You also have to recognize that. Uh, countries like China and Taiwan and things of that nature. Um, do you have some, some more efficiency in making these products right. Um, and so. You do have to recognize that as well. And so, uh, and that leads me into my third pro is, uh, national security. Again, if we're not so reliant on other countries, Uh, then we don't necessarily have to wait on them to send us medical supplies and medicine and things of that nature. That potentially there. Um, kind of cornering the market if you will. And if we can produce or manufacturer some of those items here locally, domestically, whether it be semiconductors. Um, Uh, medical supplies or energy, whatever that may be. Uh, they cannot use that as a. A weapon or a way to, uh, control us or have power over us. Right. And then adding tariffs as a way for trade. Um, negotiation, leverage, and I think that's really what's going on here with Trump. If you read. His, his book, art of the deal. You go for the big ass first. Right? And so, Hey, I'm going to put X, uh, Percent tariffs on everybody. Right? Um, and then that gets the negotiation started. And so, um, Kind of going into the way I view things. I think he's just trying to get into negotiation so that we can become, or get a better deal as us versus, uh, kind of how we've had it in the past. Right. And so, Uh, he wants to have more revenue coming to the U S um, but again, up to you to decide on whether that's true or not. Right. And so what are some cons of tariffs, right? Uh, obviously we've talked about some pros. Uh, potentially having more us jobs. Um, not being reliant on other countries for valuable items, such as medical supplies or energy. But what is the downside of adding a 25% tariff across the board on, on Canada or China or, or whoever? Right. Um, and so here's the flip side tariffs can can up in, or it can end up. Uh, being hidden on the tax consumer. So it is going to cause a little bit of inflation, right? Because, um, as much as we think China would do this, Uh, being facetious here a little bit. Um, if we add 25% tariff, they're not just going to eat that cost. Right. They're going to pass that down to the consumer. So those things that you're buying on Amazon, they will go up right. And so, um, since foreign companies now have to pay those taxes. They're going to pass that on to us. Um, and so a perfect example is when the Trump administration. Excuse me, the Trump administration imposed tariffs on Chinese goods. The prices of everyday products. Electronics appliances clothing all went up. Right. And so, um, so that's not good, right? We we're trying to combat inflation. That was one thing. Trump. Uh, really hounded the Biden administration about as inflation inflation inflation. Well, if he, as these tariffs, there may or potentially will be, uh, more inflation, right. And that's not what we need right now. We want. Uh, less inflation. So. Um, So that's one negative, right? One con the other con is, well, the, it works both ways, right? So if, if he puts a 25% tariff on somebody, Or the us government puts a, uh, 25% tariff on some money. Then they're likely to come back and say, ah, well, we're going to put a tariff on, on the things that you export to us. Right. Um, so this could hurt the farming industry could hurt manufacturers, things of that nature. So they, like I said earlier, there is a fine balance of. Of what we should add tariffs on and how we can leverage our manufacturer here domestically and what we can do to kind of. Create a win-win situation for everybody. Um, and so hopefully, uh, our president can figure it out. Um, some people deny or deny the fact that he can, um, I'm just going to be optimistic and hope that we can get a better deal for, for all Americans. Um, and, and we'll kind of see where it goes from there, but, but really. Um, most of you probably don't even care kind of what, um, what that's going to do for the overall economy, as much as you care about how is this going to affect me and my situation. So what does this mean for her? Uh, my financial planning goals, right. Uh, retirement long-term investments and things of that nature. So investments, right. If tariffs are raised at certainly. Uh, if terrors are raised certain industries, yes. They, they might benefit or, um, they could struggle. Right? So tech costs, retail. Um, they could struggle, right? Because. Um, China has a kind of assuring old on the semiconductors and a lot of the parts and pieces to these things like the iPhone and things of that nature because they manufacture over in China. So if they're importing those goods, Oh, now your iPhone may go up 20% or 30%, right. Depending on, um, what that tariff is and how many parts are affected and things of that nature. But. The benefit. I think longterm could be that now we're getting more domestic manufacturing jobs. Those us based companies will have more revenue, potentially more demand. Um, potentially more profitability at that point. Um, and so those investments could go up. And so this is a key reason why you should have a well-diversified portfolio and not all in, on tech or a specific company or specific. Uh, large cap, small cap, whatever that may be. And welder. Diversified portfolio will help mitigate, uh, the short term kind of up and down and volatility. Right. Now as inflation as in, uh, how it's going to affect your pocket book right away. Tariffs will likely drive up the price. So you think about all the things that we import. Um, miss the vast majority of the things that we buy, like I said, off Amazon, or even, uh, in your local home Depot, things of that nature. Um, so it can really, uh, inflate. For lack of better terms, the prices that you're paying at the store and things of that nature. So, so your day-to-day, it may, uh, your spending may go up because of that. Right. And then lastly, how will the market kind of treat this as we saw a few weeks ago? Uh, Trump kind of announced what he wanted to do with Canada and Mexico, as far as the 20 or 25% tariffs. Um, and, and the market kind of said, oh, we don't like that. Right. And it pulled back quite a bit. And so. Now that the tariffs got extended and they're starting to negotiate. Market volatility has kind of calmed down, but as we're kind of going through these negotiations are where we end up. There will be some market volatility. Um, and so again, This is why we want a well-diversified portfolio is because we can kind of mitigate that because there will only be certain industries. That will be affected. Um, Depending on how the tariffs end up getting shaked out. So at the end of the day, tariffs are. Double-edged shored, um, whether they help or hurt or how they're implemented and a broader economic condition. Um, but. For you, if you have a well thought out financial plan, you have a well-diversified portfolio. Um, my. Best, uh, advice to you is just to keep doing what you're doing. If you're unsure about your situation, always meet with a professional. Um, but I would not worry too much about tariffs. Um, affecting the overall outcome, especially right now, when there's so much unknown. Um, I'm always a big believer on control, what you can control and what you can control. Is your income. You're spending and how much you're investing in what you're investing in. Right. And if you can control those three, four things. Um, you're likely going to have a better outcome. Um, than most, because you're not worried about what is Trump doing here? What is Trump doing there? How is China going to react to this tariff or that tariff? It doesn't necessarily matter. Um, yes. Is it going to make your investment swing up or down and be a little bit more volatile in the short term? Yes, but again, if you have a well thought out diversified portfolio, Then, um, it shouldn't matter too much to you. So I hope you found this episode helpful today. Um, The pros and cons of terrace. Again, it's been in the news. So I thought it'd be helpful to go over that. So if you found this episode helpful, make sure you subscribe. Leave a review on your favorite podcasting app. Like this video on YouTube. And if you'd like help or you're unsure about your financial plan, go to Palm valley, wm.com. And sign up for a free call and look to talk to you about your situation. See if there's anything I can do to help. Um, but thanks for tuning in to retire early retire. Now we'll see you next time. This podcast is for educational purposes only. It is not meant to be financial, legal or tax advice. Please seek a professional about your specific situation. Key Palm valley wealth management in mind when making those considerations.