What the Latest Tariffs Could Mean for Investors

If you’ve seen the headlines about new U.S. tariffs and global trade tensions, you’re not alone in wondering what it means for the economy—and more importantly, your investment portfolio.

But just in case you missed the news, on April 2nd, the U.S. administration announced a broad set of reciprocal tariffs—in other words, taxes on imported goods from countries with large trade deficits with the U.S. 

Some of the headline numbers:

• 34% tariffs on imports from China
• 20% on goods from the European Union
• 46% from Vietnam, with other large numbers for Taiwan, Japan, India, and South Korea
• 10% baseline tariff on imports from most other countries
• 25% tariff on imported autos

These are some of the largest tariffs imposed in the postwar era, and they arrived faster and more broadly than markets anticipated. While the Trump administration’s tariffs were expected, the surprise came in how aggressive they were. Instead of applying a simple like-for-like approach—matching the tariffs other countries impose on U.S. exports—the White House based its reciprocal tariffs on the size of the U.S. trade deficit with each country. This methodology included non-tariff barriers and resulted in much higher effective rates than the market had priced in.

Let’s break down what’s happening, what it might mean for the markets, and how we at The Retirement Planning Group are thinking about it in the context of your retirement plan.

Why Does This Matter?

Tariffs are taxes on imports. In theory, they’re designed to encourage domestic manufacturing by making foreign goods more expensive. But in practice, they also:

• Increase costs for businesses that rely on global supply chains
• Lead to higher prices for consumers
• Add uncertainty for markets, which don’t like surprises

It’s this uncertainty that’s creating the most concern right now—not just about what’s been announced, but about what might happen next. Are these tariffs just a negotiating tactic, or are they here to stay?

What Could This Mean for the Economy?

1. Slower Growth: When companies are unsure about costs, they tend to pause investments and hiring. That could temporarily slow down economic activity.
2. Sticky Inflation: If tariffs lead to higher prices on everyday goods (think cars, appliances, or electronics), it could make inflation a little harder to tame—especially if consumers bear the brunt of the cost.
3. Market Volatility: Stocks may bounce around as investors try to figure out how companies will adapt. Businesses that depend heavily on international trade could be hit hardest in the short term.

So, Should Investors Be Worried?

While tariffs can affect short-term sentiment and certain sectors, they don’t change the fundamentals of long-term investing. And for most retirement-focused investors, short-term market moves are not the biggest concern—your time horizon and financial goals are.

Here’s how we’re thinking about this:

• Recession risk rises but is not a certainty. The U.S. economy remains strong, supported by healthy consumer spending and corporate earnings.
• Lower rates can help consumers. Bond yields have fallen rapidly and that translates to lower mortgage costs, lower car loans, lower student loans and lower credit servicing costs. This will allow consumers and businesses to finance and refinance debts and improve balance sheets. 
• Diversification is your best defense. A well-balanced portfolio—with exposure to U.S. and international equities and bonds—helps smooth the ride during periods of volatility.
• Stay focused on the long term. It’s tempting to react to headlines, but history has shown that staying the course usually pays off. One of the benefits of a thoughtful financial plan is to prevent hasty, emotional decisions in turbulent times

What You Can Do

Maintaining perspective and patience are key traits to investing. This is not the first time the markets have reacted to tariffs and it won’t be the last. Below you’ll see 6 historical tariffs and the S&P 500 estimated return two years after the announced tariffs:

Reciprocal Tariff Act (1934): Allowed the president to negotiate bilateral trade agreements, leading to tariff reductions and promoting international trade.

S&P 500 Performance: From June 1934 to June 1935, the S&P 500 increased by about 41%, indicating a positive market response.

Trade Expansion Act (1962): Granted the president authority to negotiate tariff reductions, leading to significant cuts in duties.

S&P 500 Performance: Between October 1962 and October 1963, the S&P 500 rose by approximately 20%.

Trade Act of 1974: Provided the president with fast-track authority to negotiate trade agreements and aimed to reduce trade barriers.

S&P 500 Performance: From January 1975 to January 1976, the S&P 500 increased by about 31%.

Omnibus Foreign Trade and Competitiveness Act (1988): Aimed to address trade deficits and unfair trade practices, enhancing the president’s authority in trade negotiations.

S&P 500 Performance: Between August 1988 and August 1989, the S&P 500 rose by approximately 29%.

Steel Tariffs (2002): Imposed tariffs of up to 30% on steel imports to protect domestic producers; later ruled illegal by the WTO.

S&P 500 Performance: From March 2002 to March 2003, the S&P 500 declined by about 24%, amid broader market downturns.

Trump Administration Tariffs (2018): Imposed tariffs on solar panels, washing machines, steel, aluminum, and various Chinese goods, leading to global trade tensions.

S&P 500 Performance: Between March 2018 and March 2019, the S&P 500 experienced volatility but ultimately gained around 4%.

The Bottom Line

Tariffs will create waves in the market, but they don’t sink retirement plans built on solid, diversified foundations. Our job is to help you focus on what you can control—your goals and the carefully crafted plan we’ve built for you.

Let the headlines come and go. Stay the course. And as always, if you have any concerns please reach out to your Wealth Manager!