by: Daniel Da Ponte, AIF®
Donald Trump started publicly discussing tariffs in the late 1980s, when he was a prominent New York City real estate developer considering a political career. At the time and since then, he’s argued that the U.S. has been exploited by major economies and that tariffs could help level the playing field. Fast-forward to today, Trump has announced broad tariffs ranging from 10% to 50% across various countries.
Tariffs have been a central theme since Trump’s first administration and were a key issue in his 2024 campaign. Many analysts believe Trump’s tariff strategy is primarily a negotiating tool. However, economists generally agree that if these tariffs remain in place without securing trade deals, they could have severe negative impacts on both the U.S. and global economies.
Looking ahead, Trump and his administration have suggested that countries seeking relief from these tariffs should reduce their own tariffs on U.S. goods. The method used to calculate these foreign tariffs is disputed, but this stance may open opportunities for further negotiations. For instance, when Trump initially announced tariffs on Canada and Mexico on February 3, markets reacted negatively, but a 30-day pause was quickly announced on the same day, illustrating the potential for rapid but volatile policy adjustments.
As for what to expect, predicting the next steps is speculative at best. While it’s unlikely any government would intentionally trigger or even manufacture a recession, the coming days and weeks will provide a solid perspective for the short-term.
In times of sharp market declines, investors often react emotionally by altering their investment strategies, including stopping their systematic investments or radically changing their portfolio allocation. However, if your financial situation, time horizon, and goals remain unchanged, it’s advisable to maintain your investment course. For most investors, their diversified portfolios never perform as well or as bad as the market indices reported on the business news outlets or evening news.
Long-term investors who have diversified their portfolios and rebalanced as needed have typically been rewarded for their risk tolerance. While the tariff saga and market volatility will continue to unfold, investors can benefit from historical context and a disciplined approach.