On Tuesday, March 4, 2025, the Trump Administration imposed sweeping tariffs against the country’s three biggest trading partners: 25% tariffs on imported goods from Canada and Mexico and 20% tariffs on products from China. These nations announced plans for tariffs of their own
on U.S. goods, sparking a trade war. In a series of stutter steps since then, the Trump Administration has alternately paused tariffs on some goods while increasing tariffs on others. In response, the U.S. markets droppe
d sharply. (No shock there, since the markets themselves hate uncertainty.)
The latest round of tariffs is an example of the many disruptive forces that the market—and by extension, your personal finances—may face. This time around it happens to be the government using one of its tools of industrial policy. But disruption could come from any direction. It could come from relatively predictable federal interest rate movements, for instance, or black swan events like the Covid pandemic or one of the world’s biggest ships blocking global trade through the Suez Canal for a week.
History can give us a clue as to us how events like these have shaken out in the past. But past performance is not indicative of future results, as the SEC likes to remind us. So unfortunately, there’s no way for us to know what will happen six days, six months or even six years after a disruptive event takes place.
What History Can Teach Us
Let’s look for a moment at the history of tariffs in the U.S. Over the last century, the country has only seen a couple of instances of tariffs on par with the latest round from the Trump Administration.
Take the Smoot-Hawley Tariff Act of 1930. It was enacted during the early years of the Great Depression and designed to protect American farmers and manufacturers from foreign competition by raising import tariffs on a wide range of goods. The effects of these tariffs are widely considered to have been disastrous. Canada and European countries retaliated with their own tariffs, global trade fell and the U.S. experienced a period of deflation.
On the other hand, the first Trump Administration’s 2018 tariffs didn’t have the same impact, though neither did they have their intended effect of reducing the trade imbalance. In fact,
What’s more important than the relatively short-term effects of these tariffs is that throughout this entire period—from the 1930s to the present day—the market has been steadily on the rise. This is despite the fact that many disruptive events took place during the same period, including World War II, 1970s stagflation, 9/11 and the Great Recession, to name a few.
Your Next Steps
This is not to say that disruptive events won’t have an impact on your life; they may. It’s possible, for instance, that the latest round of tariffs could have a direct impact on your wallet if they push prices higher. This could be a drag on your finances—especially if you’re on a fixed income—and may warrant a close look at your budget and spending.
When it comes to your investment portfolio, remember that it’s been designed with the understanding that disruptive events happen, and the market has tended to rise in the long-term. As a result, you’re already prepared to deal with disruptive forces. When they happen, you may feel the need to snap into action—a totally natural response our nervous systems have graced us with. In fact, you’re already doing something to address them.
We’ve worked together to create an investment plan that’s structured for tax efficiency and allocates your assets according to your need, willingness and ability to take on risk. Proper diversification and disciplined rebalancing may help you capture better risk-adjusted returns no matter the economic backdrop. And if your goals change, we can work together to adjust your allocations accordingly.
With that said, in the short-term, you may not need to make any adjustments at all to your strategy. Of course, disruptions are, by nature, jarring. So, if you have any questions about what’s going on in the news, markets, economy or your own portfolio, please reach out.