Tariffs & Your Finances

What are tariffs? Tariffs are taxes or duties imposed by a government on imported goods. While historically used as a source of revenue for governments, they are now used primarily to help protect domestic industries by making foreign products more expensive.

Why tariffs now?

In addition to President Donald Trump’s policies emphasizing using tariffs as a tool to help protect American industries and address trade imbalances, they are also being used to help reign in illegal immigration inflows, as well as halt drug trafficking, particularly Fentanyl. Fact Sheet: President Donald J. Trump Imposes Tariffs on Imports from Canada, Mexico and China – The White House

What are reciprocal tariffs? Reciprocal tariffs are import taxes that a country imposes in response to similar tariffs placed on its exports by another country. The basic idea is to match the level of tariffs that trading partners impose on each other’s goods.

How might these tariffs affect my retirement planning and my investments? In the short-term, tariffs are creating volatility in the stock market, particularly affecting companies with significant international exposure. Market analysts project that the S&P 500 could see a 2-3% reduction in earnings per share under current tariffs, with deeper impacts if additional measures are enacted. When earnings are down, stock prices tend to follow.

Additionally, tariffs are likely to increase prices on many consumer goods. According to the Peterson Institute, Trump’s proposed tariffs could add more than $2,600 in annual expenses for the average American household. This is particularly significant for retirees living on fixed incomes.

How might tariffs affect my Social Security benefits?

The Social Security Administration adjusts benefits yearly through cost-of-living adjustments (COLA) to combat inflation. Although these increases may temporarily fall behind tariff-driven price increases, the adjustment system should ultimately reflect the higher prices in your benefits, helping protect your purchasing power (This is why it’s so crucial to optimize your Social Security claiming strategy).

Above all, remember…

Volatility is a natural part of investing, often following periods of strong market enthusiasm. Historical data shows that the S&P 500 has experienced 5% or more declines in 91 of the past 98 years, yet markets have consistently demonstrated resilience and long-term recovery. Maintaining a disciplined, long-term approach remains key. _________________________________________________________________

Investment advisory services offered through Brookstone Wealth Advisors, LLC (BWA), a registered investment advisor and an affiliate of Brookstone Capital Management, LLC. BWA and R&R Financial Advisors, LLC are independent of each other. Insurance products and services are not offered through BWA but are offered and sold through individually licensed and appointed agents. Information provided is not intended as tax or legal advice and should not be relied on as such. You are encouraged to seek tax or legal advice from an independent professional.