On April 2, President Trump announced new tariffs on nearly all major trading partners. These tariffs are “reciprocal” in that they correspond to tariffs each country imposes on U.S. goods and are on top of previously announced duties. As I write this, the market is selling off. Let’s tackle this head-on, as many investors are concerned about where this may lead.
First, I want to emphasize that it’s been less than 24 hours since the initial announcement. Most of the headlines are knee-jerk reactions based on assumptions and incomplete information. That being said, I’ve compiled a list of six common questions and our responses below. Following the Q&A, I’ll break down some of the broader ramifications of tariffs and provide some historical perspective.
Tariffs Q&A:
1. “What is Happening? Can You Explain the Tariff Structure? “
- The Trump administration unveiled a sweeping set of tariffs. Starting April 5, 2025, a universal 10% tariff will be imposed on all imported goods, applying to all countries unless specific exemptions are made. Additional “reciprocal tariffs” targeting approximately 60 countries deemed the “worst offenders” in trade practices will begin on April 9, 2025. Rates vary, with some as high as 54% (e.g., China), calculated based on perceived trade barriers like tariffs, currency manipulation, and subsidies.
2. “Why Is This Happening Now? And How Long Will This Last?”
- This is the steepest U.S. tariff regime in a century, aimed at shrinking a $1.2 trillion trade deficit and boosting manufacturing. The plan has been in development since the presidential campaign, with Trump and his team arguing the tariffs will revitalize American industry and address decades of unfair trade practices.
- Trump’s calling it ‘Liberation Day,’ signaling he may be in it for the long haul. Still, other countries may retaliate, potentially leading to shifts in the policy. The timeline remains uncertain—it could last for years or weeks if negotiations make progress.
3. “Should I Be Worried About a Trade War? Are We Heading for a Recession?”
- Trading partners have voiced strong concern over the newly announced 10% baseline and reciprocal tariffs, with the EU, China, and others threatening retaliation. However, no concrete countermeasures have been imposed yet. For now, a full-blown trade war remains a risk, but not a certainty.
- Economist say these tariffs could lower GDP growth in the quarters ahead and push inflation higher. That’s a concern, but there’s no consensus on a recession yet—growth could just slow rather than turn negative. Back in 2018, Trump’s tariffs (e.g., 25% on steel) slowed growth but didn’t trigger a recession, thanks to strong consumer demand. Today’s broader scope—covering all imports—raises the stakes, but it’s not a straight line to recession.
4. “What’s Happening to My Investments?”
- Markets reacted sharply to the tariff announcements. Stocks opened lower today, with companies that import goods hit the hardest. Examples include Apple, Ford, Nike, and other heavy importers. Treasury yields are falling as investors move to safe-have assets, and bonds are providing diversification benefits to cushion some of the selloff. Oil prices are declining due to concerns about slower growth.
- Markets tend to react negatively to uncertainty, and today’s volatility reflects that. However, we want to stress that many of these early moves are knee-jerk reactions based on assumptions and incomplete information. It will take time for the true impact to show up in economic data and company fundamentals. We’re closely monitoring developments, but there is no need to lock in a guess today. Days like today are why we built diversified portfolios that span across stocks, bonds, and other asset classes.
5. “How Will These Tariffs Affect My Cost of Living?”
- The 10% tariff starts April 5, and reciprocal tariffs start April 9. Immediate price hikes are possible but not certain—supply chains need time to adjust. Longer-term, there are estimates that these tariffs could add about $1,000 to your yearly expenses—think higher costs for phones or cars. But it’s early days; prices won’t spike overnight. Economists expect firms to absorb some tariff costs short-term, softening the blow, but there is no consensus about how much.
6. “What Should I Do Right Now?”
- Tariffs will begin in a few days, but their impact will unfold gradually over the coming months. From a budgeting perspective, it’s wise to plan for a slight increase in your monthly expenses. That said, there’s no need to make major changes right now. If you’ve been considering a big purchase like a car, it might make sense to do it sooner rather than later due to the potentially higher costs of imported vehicles and parts. But when it comes to investments, it’s best to stay patient and reassess once the tariffs take effect rather than making any immediate changes.
Reciprocal Tariffs and the Market Reaction
The average tariff rate across countries is 25%, with rates for some as high as 49%. While the implementation of these tariffs was widely telegraphed by the White House, the level and scope are greater than many investors and economists expected. The immediate market reaction was negative, with the S&P 500 declining over 3% and the 10-year Treasury yield declining to around 4%.
There are many arguments for and against tariffs, and the topic can be politically charged. Regardless of how we each feel about these measures, we can acknowledge that these tariffs do represent a significant change in the global economic system.
It’s important in times like these to remember that markets can be fragile in the short run but are resilient in the long run. Over the past century, markets have experienced significant global economic shifts including wars, recessions, bubbles, pandemics, political change, and technological revolutions.
In times of uncertainty, it can feel as if markets will never stabilize. Yet, history shows that markets can overcome even the most significant shocks, and often rebound when it’s least expected, as they did in early 2009 after the global financial crisis, in mid-2020 during the pandemic, in late 2022 after a technology-led bear market, and across countless other examples.
Having the fortitude and discipline to stay invested and stick to a personalized financial plan – or even to take advantage of more attractive valuations – is a key principle to long-term financial success.
The White House has announced reciprocal tariffs
Let’s cover some of the key facts. The newly-announced tariff measures have been set at a minimum 10% rate, with levels varying based on the U.S. trade deficit with each country. China, for instance, faces a reciprocal tariff rate of 34%, which is in addition to 20% tariffs previously announced.
The European Union will be subject to 20% tariffs, while Canada and Mexico will not be immediately impacted by new reciprocal tariffs, and are instead subject to the previously-announced 25% tariffs related to illegal immigration and fentanyl. There is also an across-the-board 25% tariff on all imported automobiles, effective immediately.
The United States has a long history of tariffs, and in fact they were the primary source of federal revenue prior to the establishment of the federal income tax system in 1913. However, they fell out of favor after World War II as globalization took hold.
The administration’s arguments for tariffs are to raise revenues and ensure economic fairness, especially in the manufacturing sector – a policy it has dubbed “make America wealthy again.” President Trump’s long-stated goal of reducing the trade deficit and the view that trade is unfairly balanced were on display in his April 2 speech.
Arguments against tariffs are that they effectively tax consumers who ultimately pay higher prices for goods. This is particularly sensitive today due to the inflation that households have experienced over the past few years. Historically, it’s argued that periods of high tariffs may have worsened the Great Depression and slowed global economic growth.
Trade war uncertainty is fueling market volatility
Perhaps the most important perspective for long-term investors is that this shift in trade policy will be an ongoing process. The current round of tariffs truly began after the presidential inauguration, with the “America First Trade Policy” signed on January 20. The president’s trade position has been clear, even if there were questions about what policies would actually be enacted. These latest moves show that the administration is resolved to make significant changes, but even these could be negotiated with each country over time as they were during the first Trump administration.
How does this affect markets and companies? It will take time to truly understand the impact, although some areas will be affected more than others. The general fear is that tariffs could shock the economy, potentially spurring inflation and slowing economic activity. As such, markets have already reacted negatively this year.
For example, while some domestic manufacturers might benefit from less foreign competition, markets tend to view trade barriers as negative for corporate profits, at least in the near term. Just as in the past, new trade policies force businesses to reconsider how they operate. They may adjust their sourcing strategies and can consider absorbing portions of the tariffs themselves.
In response to the 2018 tariffs, a portion of S&P 500 companies shifted their supply chains out of countries like China to reduce the impact from tariffs. These corporations relocated manufacturing facilities, found alternative suppliers, or adjusted their global production networks. While this can help companies navigate this latest round of tariffs, it takes time to adjust supply chains.
The S&P 500 sectors that are most directly impacted could be the ones with the greatest proportion of revenues coming from international sources. Nearly 30% of S&P 500 sales come from overseas, with information technology, materials, communication services, consumer staples and energy having the largest exposures according to Standard & Poor’s.
In addition to the impact on revenues, tariffs will likely affect company profit margins by raising costs for foreign-sourced components. Prior to the April 2 announcement, the estimate for 2025 S&P 500 earnings growth had fallen to 11.5% from 14.2% at the start of the year, according to FactSet. However, it’s important to note that this is occurring at a time when operating margins are historically high and productivity growth is rising. This could provide some cushion for profits.
One important fact is that a weaker dollar can be positive for both investors and companies as well. When it comes to asset allocation, international stocks have performed better this year, and a weaker dollar means that international assets are potentially more valuable in U.S. dollar terms. For companies, a weaker dollar can spur foreign sales since the cost of U.S. goods sold abroad becomes cheaper for foreign buyers.
Markets rise over long timeframes despite major setbacks
Despite the immediate market reaction, it will take time for the true impact of these trade policy changes to play out. In recent years, investors have faced numerous market concerns including the pandemic, inflation, the possibility of a Fed policy error, recession fears, and more. Each of these challenges likely felt insurmountable at the time to some.
Yet, markets not only recovered, but rose to new levels over the following years and decades. While the past is no guarantee of the future, there are many reasons to believe markets and the economy will eventually move past the current set of concerns.
Perhaps Warren Buffett said it best in 2008, during the middle of the global financial crisis: “In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a president. Yet the Dow rose from 66 to 11,497.”
This is a helpful reminder that although market swoons can be unsettling, history shows that keeping a long-term perspective is the best way to stay on track to achieve your financial goals.
As investors, it is important to focus on what we can control. In light of recent market moves and policy changes, the best approach is still to stay focused on the long run and stick to a personalized financial plan.
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
Blog Disclosures
This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own financial advisors as to legal, business, tax, and other related matters concerning any investment.
The commentary in this “post” (including any related blogs, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Financial Synergies Wealth Advisors, Inc. employees providing such comments, and should not be regarded as the views of Financial Synergies Wealth Advisors, Inc. or its respective affiliates or as a description of advisory services provided by Financial Synergies Wealth Advisors, Inc. or performance returns of any Financial Synergies Wealth Advisors, Inc. client.
Any opinions expressed herein do not constitute or imply endorsement, sponsorship, or recommendation by Financial Synergies Wealth Advisors, Inc. or its employees. The views reflected in the commentary are subject to change at any time without notice.
Nothing on this website constitutes investment or financial planning advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. It also should not be construed as an offer soliciting the purchase or sale of any security mentioned. Nor should it be construed as an offer to provide investment advisory services by Financial Synergies Wealth Advisors, Inc.
Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Synergies Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Any charts provided here or on any related Financial Synergies Wealth Advisors, Inc. personnel content outlets are for informational purposes only, and should also not be relied upon when making any investment decision. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Information in charts have been obtained from third-party sources and data, and may include those from portfolio securities of funds managed by Financial Synergies Wealth Advisors, Inc. While taken from sources believed to be reliable, Financial Synergies Wealth Advisors, Inc. has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. All content speaks only as of the date indicated.
Financial Synergies Wealth Advisors, Inc. is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Financial Synergies Wealth Advisors, Inc. and its representatives are properly licensed or exempt from licensure. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
See Full Disclosures Page Here
Special Update: Reciprocal Tariffs and the Market Reaction
On April 2, President Trump announced new tariffs on nearly all major trading partners. These tariffs are “reciprocal” in that they correspond to tariffs each country imposes on U.S. goods and are on top of previously announced duties. As I write this, the market is selling off. Let’s tackle this head-on, as many investors are concerned about where this may lead.
First, I want to emphasize that it’s been less than 24 hours since the initial announcement. Most of the headlines are knee-jerk reactions based on assumptions and incomplete information. That being said, I’ve compiled a list of six common questions and our responses below. Following the Q&A, I’ll break down some of the broader ramifications of tariffs and provide some historical perspective.
Tariffs Q&A:
1. “What is Happening? Can You Explain the Tariff Structure? “
2. “Why Is This Happening Now? And How Long Will This Last?”
3. “Should I Be Worried About a Trade War? Are We Heading for a Recession?”
4. “What’s Happening to My Investments?”
5. “How Will These Tariffs Affect My Cost of Living?”
6. “What Should I Do Right Now?”
Reciprocal Tariffs and the Market Reaction
The average tariff rate across countries is 25%, with rates for some as high as 49%. While the implementation of these tariffs was widely telegraphed by the White House, the level and scope are greater than many investors and economists expected. The immediate market reaction was negative, with the S&P 500 declining over 3% and the 10-year Treasury yield declining to around 4%.
There are many arguments for and against tariffs, and the topic can be politically charged. Regardless of how we each feel about these measures, we can acknowledge that these tariffs do represent a significant change in the global economic system.
It’s important in times like these to remember that markets can be fragile in the short run but are resilient in the long run. Over the past century, markets have experienced significant global economic shifts including wars, recessions, bubbles, pandemics, political change, and technological revolutions.
In times of uncertainty, it can feel as if markets will never stabilize. Yet, history shows that markets can overcome even the most significant shocks, and often rebound when it’s least expected, as they did in early 2009 after the global financial crisis, in mid-2020 during the pandemic, in late 2022 after a technology-led bear market, and across countless other examples.
Having the fortitude and discipline to stay invested and stick to a personalized financial plan – or even to take advantage of more attractive valuations – is a key principle to long-term financial success.
The White House has announced reciprocal tariffs
Let’s cover some of the key facts. The newly-announced tariff measures have been set at a minimum 10% rate, with levels varying based on the U.S. trade deficit with each country. China, for instance, faces a reciprocal tariff rate of 34%, which is in addition to 20% tariffs previously announced.
The European Union will be subject to 20% tariffs, while Canada and Mexico will not be immediately impacted by new reciprocal tariffs, and are instead subject to the previously-announced 25% tariffs related to illegal immigration and fentanyl. There is also an across-the-board 25% tariff on all imported automobiles, effective immediately.
The United States has a long history of tariffs, and in fact they were the primary source of federal revenue prior to the establishment of the federal income tax system in 1913. However, they fell out of favor after World War II as globalization took hold.
The administration’s arguments for tariffs are to raise revenues and ensure economic fairness, especially in the manufacturing sector – a policy it has dubbed “make America wealthy again.” President Trump’s long-stated goal of reducing the trade deficit and the view that trade is unfairly balanced were on display in his April 2 speech.
Arguments against tariffs are that they effectively tax consumers who ultimately pay higher prices for goods. This is particularly sensitive today due to the inflation that households have experienced over the past few years. Historically, it’s argued that periods of high tariffs may have worsened the Great Depression and slowed global economic growth.
Trade war uncertainty is fueling market volatility
Perhaps the most important perspective for long-term investors is that this shift in trade policy will be an ongoing process. The current round of tariffs truly began after the presidential inauguration, with the “America First Trade Policy” signed on January 20. The president’s trade position has been clear, even if there were questions about what policies would actually be enacted. These latest moves show that the administration is resolved to make significant changes, but even these could be negotiated with each country over time as they were during the first Trump administration.
How does this affect markets and companies? It will take time to truly understand the impact, although some areas will be affected more than others. The general fear is that tariffs could shock the economy, potentially spurring inflation and slowing economic activity. As such, markets have already reacted negatively this year.
For example, while some domestic manufacturers might benefit from less foreign competition, markets tend to view trade barriers as negative for corporate profits, at least in the near term. Just as in the past, new trade policies force businesses to reconsider how they operate. They may adjust their sourcing strategies and can consider absorbing portions of the tariffs themselves.
In response to the 2018 tariffs, a portion of S&P 500 companies shifted their supply chains out of countries like China to reduce the impact from tariffs. These corporations relocated manufacturing facilities, found alternative suppliers, or adjusted their global production networks. While this can help companies navigate this latest round of tariffs, it takes time to adjust supply chains.
The S&P 500 sectors that are most directly impacted could be the ones with the greatest proportion of revenues coming from international sources. Nearly 30% of S&P 500 sales come from overseas, with information technology, materials, communication services, consumer staples and energy having the largest exposures according to Standard & Poor’s.
In addition to the impact on revenues, tariffs will likely affect company profit margins by raising costs for foreign-sourced components. Prior to the April 2 announcement, the estimate for 2025 S&P 500 earnings growth had fallen to 11.5% from 14.2% at the start of the year, according to FactSet. However, it’s important to note that this is occurring at a time when operating margins are historically high and productivity growth is rising. This could provide some cushion for profits.
One important fact is that a weaker dollar can be positive for both investors and companies as well. When it comes to asset allocation, international stocks have performed better this year, and a weaker dollar means that international assets are potentially more valuable in U.S. dollar terms. For companies, a weaker dollar can spur foreign sales since the cost of U.S. goods sold abroad becomes cheaper for foreign buyers.
Markets rise over long timeframes despite major setbacks
Despite the immediate market reaction, it will take time for the true impact of these trade policy changes to play out. In recent years, investors have faced numerous market concerns including the pandemic, inflation, the possibility of a Fed policy error, recession fears, and more. Each of these challenges likely felt insurmountable at the time to some.
Yet, markets not only recovered, but rose to new levels over the following years and decades. While the past is no guarantee of the future, there are many reasons to believe markets and the economy will eventually move past the current set of concerns.
Perhaps Warren Buffett said it best in 2008, during the middle of the global financial crisis: “In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a president. Yet the Dow rose from 66 to 11,497.”
This is a helpful reminder that although market swoons can be unsettling, history shows that keeping a long-term perspective is the best way to stay on track to achieve your financial goals.
As investors, it is important to focus on what we can control. In light of recent market moves and policy changes, the best approach is still to stay focused on the long run and stick to a personalized financial plan.
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
Blog Disclosures
This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own financial advisors as to legal, business, tax, and other related matters concerning any investment.
The commentary in this “post” (including any related blogs, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Financial Synergies Wealth Advisors, Inc. employees providing such comments, and should not be regarded as the views of Financial Synergies Wealth Advisors, Inc. or its respective affiliates or as a description of advisory services provided by Financial Synergies Wealth Advisors, Inc. or performance returns of any Financial Synergies Wealth Advisors, Inc. client.
Any opinions expressed herein do not constitute or imply endorsement, sponsorship, or recommendation by Financial Synergies Wealth Advisors, Inc. or its employees. The views reflected in the commentary are subject to change at any time without notice.
Nothing on this website constitutes investment or financial planning advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. It also should not be construed as an offer soliciting the purchase or sale of any security mentioned. Nor should it be construed as an offer to provide investment advisory services by Financial Synergies Wealth Advisors, Inc.
Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Synergies Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Any charts provided here or on any related Financial Synergies Wealth Advisors, Inc. personnel content outlets are for informational purposes only, and should also not be relied upon when making any investment decision. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Information in charts have been obtained from third-party sources and data, and may include those from portfolio securities of funds managed by Financial Synergies Wealth Advisors, Inc. While taken from sources believed to be reliable, Financial Synergies Wealth Advisors, Inc. has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. All content speaks only as of the date indicated.
Financial Synergies Wealth Advisors, Inc. is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Financial Synergies Wealth Advisors, Inc. and its representatives are properly licensed or exempt from licensure. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
See Full Disclosures Page Here
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