An Introduction
In edited and abridged excerpts from Frank Holmes’ latest newsletter he points out that “History teaches us that tariffs—while well-intentioned as tools for protectionist policies—tend to raise consumer prices and the Trump Administration is proposing a sweeping 60% tariff on all goods imported from China and a 25%-tariff on goods from Mexico and Canada”, the U.S.’s 3 largest trading partners.
What Tariffs Would Mean for Investors & Consumers Alike – The Cons and Pros
“Most economists agree that disrupting these relationships would drive up prices…and could lead to ripple effects across commodities markets, manufacturing and technology sectors as, after all, tariffs are essentially taxes on imports, and the importing businesses typically pass those costs on to the end consumer. Indeed, according to UBS a hypothetical 10% tariff on all goods entering the U.S. would increase overall prices by an estimated 1.3% annually and be extremely disruptive if supply chains can’t adjust quickly enough to avoid the additional costs.”
Some History
During Trump’s first term his Administration imposed a 20% tariff on washing machine equipment “and 12 months after the tariffs were in place, Americans were paying roughly $100 more per washing machine and dryer.
Similarly, the broader trade war with China raised costs for everything from electronics to furniture, adding an estimated $3.2 billion per month in additional taxes for American consumers.
The same could happen again, but on an even more dramatic scale. Under Trump’s trade policies, a pair of $80 jeans could cost between $10 and $16 extra, while a $50 tricycle could cost an additional $18-$28 more, according to a new report by the National Retail Federation (NRF).”
The Silver Lining
The above being said, however, “companies that produce goods domestically or operate in sectors less sensitive to global trade could find opportunities in a high-tariff climate. U.S. manufacturers that compete with imports could see increased demand due to higher prices on foreign alternatives.”
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