Posted by Only one month into Trump 2.0 and he has given investors a lot to worry about. It seems like every time the subject of tariffs comes up the stock market has a volatile reaction. Trump says a tariff is a tax on another country and financial experts say that tariffs are a tax on American consumers. They never differentiate between an import tariff and an export tariff. An import tariff is a tax levied on goods brought into a country. Governments use import tariffs to protect domestic industries from foreign competition, to raise revenue, or to retaliate against other countries’ trade policies. Import tariffs make foreign goods more expensive, which can encourage consumers to buy domestic products instead.
Export tariffs are less common than import tariffs but may be used to control the export of certain goods, manage shortages, or stabilize domestic prices. By taxing exports, governments can discourage the export of goods that are in short supply domestically or that they want to keep at a lower price within the country. The proposed 25% import tariffs on Canada and Mexico have been put on hold until March 2025. China already has heavy tariffs ranging from 25% on steel and aluminum to 100% on electric vehicles. That keeps cheap Chinese electric vehicles from entering the US market. China will most likely retaliate with increased tariffs on US products. I don’t see China being open to trade negotiations because they consider the US as an adversary.
It would be good to level the playing field so that China isn’t producing virtually everything we buy. It will take many years to change the current situation. It is optimistic to think that tariffs and a sovereign wealth fund will eliminate the need for a federal income and social security tax. When I heard about this, I was surprised that the US didn’t already have a wealth fund. Government expenses are paid with taxes and there hasn’t been a surplus since 2001. Since then, the federal government has consistently run budget deficits. Despite the challenges of cutting federal expenses and implementing funding alternatives, at least it looks like Trump is trying to get people thinking about making changes. We definitely can’t keep running the federal budget like we have. I just hope that the America people don’t get financially hurt in the process.