Understanding Tariffs: The Short-Term Pain and Long-Term Gain for Women Investors

**Disclaimer**: Please note that since the time of filming, the Trump administration has largely pulled back on implementing tariffs on countries other than China. This video reflects the economic landscape and proposed policies at the time of recording. For the most current information on tariffs, please subscribe to my FREE newsletter: https://mcwealthwisewomen.substack.com

Unpack the complexities of the 2025 tariff strategy and its impact on global markets, interest rates, and U.S. debt refinancing. In this episode, we explore how the administration's bold moves aim to reshape the geopolitical landscape while driving domestic growth and generating revenue. Learn why the 2025 tariff strategy is creating short-term market volatility and what it means for your financial future. Stay informed and discover how the 2025 tariff strategy could influence long-term economic trends.

Transcript

>> Wes Cuprill: 0:00

Hello, I'm certified financial planner Wes Cuprill, and this is Wealthwise Women, the show that's rewriting the narrative that personal finance in investing are just for men and just for insiders. Because whether or not the rest of my industry realizes it, the future of wealth in the United States is female. And I aim to foster that future one episode, at a time. So join me every week as I attempt to add humor and entertainment to the otherwise snooze feest that is personal finance, addressing various topics along the way from the lens of how they affect women in particular. And if you like what you hear, be sure to subscribe to our channel and our newsletter, the link to which you can find on the screen or in the details below. That being said, let's get to this week's episode. Hello there and welcome to another episode of the show. I normally record each episode on the Monday before it airs. However, given the fluidity of the current situation and a lot of the volatility in the stock market, I wanted to record as close to publishing day as possible. So my editor Michael was very gracious to say that I could film this week's episode on Wednesday. So I'm filming this right now, morning, of Wednesday, April 9th, and it will come out on Thursday, April 10th. Now, quick recap. The tariffs were announced last week, and the response in the stock market has been negative across the board. We saw some gains in early trading earlier this week, but those gains were lost by the end of the trading day. So there's been a lot of uncertainty, a lot of speculation and a lot of fear in the markets, and that's led to a very rapid decline in market value. I'm going to touch a little bit later on what this means for investors and those with retirement savings, but I first want to discuss the objectives that the administration is trying to accomplish with these tariffs. I've touched on them briefly in previous episodes, but now with some more time to research all this and graphs what exactly is at play, I wanted to share some insight with you all. It's not to say that, you know, it will help you accept what's going on, but it'll certainly help, I think, with some understanding of why these tariffs are being implemented and why they're being implemented so aggressively. So there are four points that I want to discuss, the first of which is that these tariffs are being used as a way to push interest rates lower. $9.2 trillion of US debt is going to come due in 20, 20, 25, 6.5 trillionlars that is coming due by June. So all of this debt needs to be refinanced. And interest rates play a huge role in how that debt is refinanced. Each 1/100th of a percentage point drop in interest rates will save the United States $1 billion per year. So even just lowering overall interest rates just a tiny little bit is huge in helping us save on our are debt. But here's the thing. The Federal Reserve is the one who controls interest rates. They're the ones who set that number. And their activities are independent of the federal government. They operate autonomously. Trump can't come in and tell them to change interest rates and they do it. And they are very hesitant to lower interest rates. Given the recency of inflation. If we too quickly lower interest rates now, we could see inflation spike again and it could grow out of control. So the administration is looking at this going, okay, what can we do then to lower interest rates if the Fed is not going to help us do that? Unfortunately, Trump is using the markets to do this. Whether or not this is unfair, I'm not going to touch on that per se here, but it's safe to say, a reckoning was coming when it comes to debt. Our debt is over 36 trillion, I believe, and it is quickly ballooning and the interest on that debt is becoming bigger and bigger. There's a game that is played for lack of a better term, where as long as GDP keeps up with debt, we're okay. However, it's a very dangerous game to play, and politicians up until this point have been more than happy to kick the can down the road. But unless something was done, we were facing a huge debt issue. We either deal with short term pain now or we deal with much bigger pain down the road. All right, so by announcing tariffs, the markets sold off and money went from being invested in stocks to being invested in safer investments like bonds, specifically U.S. treasury bonds. And the way it works is that the greater the demand in bonds, the lower the interest rates that is prevailing in the markets. We don't have to talk about the ethics behind this, but by the stock market decreasing because of tariffs and money pouring into bonds, the yield rates became lower. So we've already seen a decrease in overall interest rates, meaning that when the government does go to refinance the debt, it will be able to do so at lower rates. So push interest rates lower. That was objective number one. So far, that does seem to be working. Again, short term pain versus long term pain down the road. Second objective, with these tariffs is growth. But I will admit it's long term. You've heard a lot about making American manufacturing viable. Again, whether or not it's possible, I'm not going to touch on assuming that it is. It will be a long term play. It's not to say that the entirety of US Manufacturing will return, but I think the objective with these tariffs is to bring investment back to the United States as much as possible. And if we're able to do that, we will see growth here domestically and that will decrease our overall trade deficit and then just help with overall revenue generation for the government. Third object is to generate short term revenue. Tariffs are taxs. They're tax on imports and they're estimated right now to bring in about $700 billion per year. Now, what this is going to allow us to do is to continue spending on things like Social Security. It is no secret that the Social Security system is also facing a reckoning. Some of the estimates that I've seen lately are saying that the Social Security trust fund is set to run out sometime in the early 2030, like 2033, if not 2032. And when that does run out, it means everybody's benefits will be cut by 23% immediately across the board, no exceptions. So if we're able to raise revenue via tariffs, that will at least bolster some of the spending in the short term on programs like Medicare and Social Security. Now, the last point I think is the most important objective or the primary objective of these tariffs, and that is to reshape the geopolitical land landscape. And it's a very large issue. And I think there are different objectives depending on the region being affected. So for tariffs on Europe, I think the objective there is to renegotiate terms around Ukraine. The US has poured a lot of money into the Ukraine Russia war. And I think Trump is looking to decrease our exposure in that conflict and push more of the onus on Europe and get them to assume a lot more of the support for Ukraine in that conflict. So I think the tariffs on the EU are being used to make concessions there. India, I've talked about this in past videos. They tariff the United States heavily on stuff we send over there. I use the example of motorcycles. We're a huge motorcycle maker, yet we control a very minuscule percentage of the India motorcycle market. It is the largest motorcycle market in the world. But the US is tariffed at 100%, so we can't really compete within that market. So Trump is using the tariffs as a way to get them to renegotiate lower their own tariffs and kind of meet us somewhere in the middle, Mexico and Canada. I've talked a bit about the objective there. I think it's a way to get them to control their sides of the border a little bit more tightly, especially when it comes to the flow of fentanyl and illegal immigrants across those borders. And then China, China is the biggest opponen that we are facing off against with these tariffs. And we're already seeing a huge escalation in the back and forth between the United States and China. Here's the situation. The Chinese Communist Party controls China with an iron fist and they are willing, I think, to accept some short term pain because they control their country. They don't necessarily care the effect that tariffs will have on the average person in China. So they're going to play a little bit of a back and forth with us. But they have artificially controlled trade in the United States. Not artificially. They have played a very aggressive game as a way to really tip the balance of power in the global trade in their favor. And there's different ways that they have done that. And the U.S. is trying to even the playing field a bit more by tariffing imports from China and get them to come back to the negotiating table and negotiate a fair deal for both sides. That one is going to be a very risky play because China may be able to wait us out. I think the rest of the world will blink first, but China, they're going to try and make us blink first. So we'll see what happens. Again, it's not to say if it's fair or unfair. I'm just trying to tell you what is happening right now. This is not to say that pain isn't going to be felt by everybody. It is, especially in the short term. Some estimates are saying that consumer loss is looking at about $4,000 per year for the average family just from tariffs alone. So it is going to hit the average Americans pocketbook. We've already seen it also affect people's investments, especially retirement savings. All right, so what does this mean though for the average person? This is where it is very, very important to not lose discipline and to not act impulsively. We have seen a lot of up and downs over the last few days. Yes, I understand most of it is down, but a lot of this is because of speculation. It is not a reflection of what is happening in the economy right now. It is a reflection of what, what could happen in the economy or what some people are thinking will happen in the economy, we don't know. Nobody has a crystal ball in terms of what's going to happen down the road. And here's the thing with the tariffs. What's different about this decline compared to, say, 2008? 2008 was the result of years of economic mismanagement and everything finally boiling over with tariffs. They were done simply by the stroke of a pen and can be very quickly undone by the same stroke of a pen. So we don't know the timing of when tariffs will be repealed. I'm confident to say that they're not always going to be in place. And so the key to remember is that eventually the markets will recover. It's not a question of if, it is a question of when. But we don't know when that is going to be. And so that's why doing anything impulsively right now could have negative consequences in the long term. Let's say you don't necessarily sell anything, but you change your overall investment mix to try and go, you know, maybe into safer investments. Well, then you will miss out on any market rallies in the future. Your money will not recover as quickly as it would have if you had stayed in your current mix. It all comes down to the importance of planning. you will hear me say that again and again, but for all of our existing clients, we've already accounted for all of this. This volatility is built in into your financial plan. So while it isn't easy to see it happen, it isn't out of the ordinary. And this is nothing that is necessarily unexpected or anything that is going to have drastic consequences on your retirement plans that we didn't already account for. We have accounted for this. So that is why it'very very important to continue to stick to that plan and think long term and not do anything rashly. For those who may not have a financial plan in place and are looking at this going okay, I actually don't know what effect this is going to have. Now is the perfect time to sit down and discuss with somebody who can help you put together a good comprehensive, holistic plan, one that takes a look at all volatility that could happen to your portfolio and enables you to put a plan in place to manage that volatility and to be able to navigate it successfully. So if you want to sit down and discuss how we can help you put together that plan, just go to visitw with mc.com. i'd love to discuss how we do that for each of our clients on an individual basis. All of that being said, I hope this helps in understanding a bit more the why behind the tariffs. And I'm not going to sit here and say if it's the right or wrong decision. Time will eventually tell if this was the right or wrong decision. I think I've said before that this is short term pain. Now exactly how short term is that? November of 2026 I think is the longest that this will go on for because that's the midterms. If this gamble does not pay off for Trump, he's going toa lose every republic in their seat essentially and you will see a huge shift in power in Washington. So I think that is the longest that this will play out, but I still don't think it's going to last that long. I think it'll be shorter term than that, but again, don't have a crystal ball. I know that sounds wishy washy for me to be hedging like that, but that's the truth. I don't know how it's going to play out. I can just tell you what I'm interpreting from this whole situation, so hope that helps. Hope this gives you a bit more of an understanding. And if you still have uncertainty or looking for a little bit reassurance in your financial situation and your plan, just go to visitw with mc.com. that being said, hope you enjoyed the episode and I'll see you next week.