Tariffs & Investments: Adapting to a Changing Market

by Andrew Messerschmidt, CFA, Assistant Vice President, Investment Officer

Impact from the proposed tariffs likely to have a much larger impact on the US economy than those put in place in 2018. The largest trading partners, Canada and Mexico, are being targeted this time around. The average tariff or “tax” on goods coming into the US was approximately 2% prior to the 2018 tariffs on China. Once they went into effect, the “tax” doubled to 4%. This was still near multi decade lows. Estimates as to the impact or “tax” on this round of tariffs is in the 20-30% range. This would bring the effective tariff rate at levels not seen since the 1930s. 

Multiple reasons have been provided by the President, the Treasury Secretary, and other members of the current administration as to the rationale behind these tariffs. Our focus is rather on making sound investment decisions and part of that relies on forward guidance from business leaders. Target reports earnings this week and highlighted uncertainty regarding tariffs as the main reason they lowered the guidance for their next quarter. The on again/off again nature of implementing tariffs as a negotiating tactic makes it difficult to plan ahead. CEOs prefer you provide them the rules they must follow and not frequently change them as they map out business investment decisions. 

There will likely be more volatility in both the stock and bond markets in 2025. Both 2024 and 2023 were below average and so far 2025 has been around the historical average in terms of day-to-day volatility. In the face of this, your financial goals should remain the most important factor to consider when looking at your investments.

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