A DEFINING MOMENT WITHIN THE AMERICAN ECONOMY
April 2025
What Are Tariffs & How Do They Impact Us?
Tariffs are essentially a tax charged to goods that are imported from other countries. The company that brings the foreign good into the country must pay this tax to the home nation’s government. Typically, this tax will be paid as a percentage of the products value. This tax must be paid before the product can enter the home economy. Tariffs are used for a multitude of reasons such as generating revenue for the government and protecting domestic industries from foreign competition. However, tariffs also have the potential to cause higher prices and could lead to trade barriers between nations.
Market Update – Tariff Turmoil
Financial markets reacted impetuously after the Trump administration announced larger than expected tariffs over the past few weeks, causing uncertainty within the economy. Financial markets do not appreciate uncertainty and typically react negatively when the path forward is unclear. The size, scope, and structure of the tariffs caught the market off guard as the White House released 10% universal tariffs on all imports coming into the country, with additional duties levied on countries operating with large trade deficits with the U.S. The potential impact of new trade policies has affected forecasts regarding economic growth and company profits causing a sharp sell-off in the global stock markets. This has been a driving factor behind the recent market volatility. The below chart demonstrates the recent exponential increase in tariff rates moving away from all-time lows compared to the historical average.
Historical Average Effective US Tariff Rate
Source: LPL Research, Bloomberg, Strategas Research, Evercore ISI Research, International U.S. Trade Commission, 04/06/25
Disclosures: Forecasts may not materialize as predicted and are subject to change.
Silver Linings
Although tariffs have impacted economic sentiment amongst investors to begin the year, our U.S. economy has historically proven to be quite resilient. Our strengths as a global leader and trade powerhouse work to create stability even during times of uncertainty. History has shown us that even during times of economic turmoil, the US economy continues to endure and has often made it back stronger than before. Through all of this, we are here to serve you and your family as we go down this path together.