Tariffs and Your Portfolio: What You Need to Know Now
You’ve probably heard the word “tariffs” tossed around in the news—usually tied to trade wars, economic uncertainty, or political headlines. But what do tariffs actually mean for you as an investor? And more importantly, how could they impact your retirement portfolio?
Let’s break it down.
What Are Tariffs, Really?
At the most basic level, tariffs are taxes on imported goods. They’re designed to protect domestic industries by making foreign products more expensive. While that might sound like an abstract economic policy, the ripple effects of tariffs are anything but abstract when it comes to the stock market, inflation, and investor behavior.
Tariffs are typically driven by four motivations:
- Decoupling: Reducing reliance on specific countries like China
- Rebalancing: Lowering trade deficits and encouraging U.S. production
- Negotiation: Creating leverage to influence policy changes
- Funding: Generating revenue for government priorities
Each approach can have a different—and often unpredictable—impact on global markets and your investment strategy.
Why the U.S. Trade Deficit Matters
In 2024, the U.S. goods trade deficit hit $1.1 trillion—one of the highest in history. This deficit means we’re importing far more than we export. While that can be a sign of strong consumer demand, it also places the U.S. at the center of complex global trade dynamics.
The government’s response? Leverage tariffs to even the playing field. But this strategy doesn’t happen in a vacuum—and other countries (like China, Canada, and the EU) often retaliate with tariffs of their own, adding volatility to global markets.
Do Tariffs Cause Inflation? It Depends.
Short answer: Yes—but it’s complicated.
When tariffs are introduced, prices on affected goods often rise. Companies may absorb some of the cost, but 30–50% of the increase is usually passed on to consumers.
The bigger risk? If trade disputes escalate into long-term tariff wars, we could see persistent inflation and rising interest rates—two headwinds that can drag down investment performance.
What is Trade Reciprocity?
Trade reciprocity sounds fair—matching tariff rates between countries—but in practice, it’s tricky. Countries like the U.S. have historically had lower tariffs on imports than some of our trading partners. Adjusting for reciprocity could help U.S. industries become more competitive—but could also provoke retaliatory measures like reduced exports, new import bans, or regulatory crackdowns on U.S. companies operating abroad.
How Do Tariffs Affect the Stock Market?
Looking back at 2018–2019, the U.S.-China trade war created serious market turbulence. The S&P 500 dropped over 18% in the 4th quarter of 2018, only to bounce back with a 31.1% gain in 2019 after trade deals were announced and consumer spending remained strong.
The takeaway? Markets don’t like uncertainty, but they’re also resilient. Timing the market based on trade news is nearly impossible—which is why having a diversified portfolio, and a long-term plan matters more than ever.
On April 3 and 4th, the S&P 500 dropped over 10% in response to the tariffs being rolled out. Take a look at the swift and aggressive selling action:
And then on April 9th, the tariffs were put on hold for 90 days which caused the market to rocket straight up in a matter of minutes. Take a look at the chart below:
It’s incredible to see how fast the market moves and it’s a great reminder that you can’t time the market. It simply moves too fast for anyone to consistently time it right.
What This Means for Investors and Retirees
Tariffs are just one piece of a much larger economic puzzle. But here’s what you can control:
✅ Stick with a globally diversified portfolio to reduce overexposure to any single region or sector
✅ Avoid emotional reactions to political headlines or economic policy changes
✅ Work with a financial advisor to evaluate how shifts in trade policy might impact your personal investment strategy
We don’t know exactly how the future of trade will unfold—but we do know that sound planning, tax awareness, and diversification are timeless principles that hold up no matter what headlines hit the news.
Want to dive deeper into the investment implications of global trade shifts? Let’s talk through how this fits into your retirement plan.
This commentary reflects the personal opinions, viewpoints and analyses of the Seaside Wealth Management, Inc. employees providing such comments, and should not be regarded as a description of advisory services provided by Seaside Wealth Management, Inc. or performance returns of any Seaside Wealth Management, Inc. client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Seaside Wealth Management, 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.