Tariffs Going Into Effect April 2 – What to Know

You may have heard that a new set of tariffs is scheduled to go into effect on April 2. These tariffs are essentially taxes on certain imported goods as part of ongoing trade policy changes. Let’s break down what this means in plain English:

•What are the tariffs and why now? These new tariffs are part of recent trade negotiations – effectively, the U.S. is imposing import taxes on a range of foreign products starting April 2. Without getting too bogged down in politics, the goal of tariffs is usually to protect domestic industries or address trade imbalances. In response, other countries sometimes retaliate with their own tariffs. (In fact, we saw a similar situation back in 2018 when China imposed tariffs on 128 U.S. products like soybeans and airplanes in retaliation for U.S. tariffs.)¹

• Sectors likely affected: Tariffs don’t hit every company equally. Businesses with global supply chains or those relying heavily on imported materials may feel the pinch the most.² For example:

• Manufacturing & Autos: Companies that use imported steel, aluminum, or parts (like auto manufacturers or heavy equipment makers) could face higher costs, potentially squeezing profit margins.

• Agriculture: U.S. farmers often get targeted by retaliatory tariffs. Key exports like soybeans, corn, or meat could see reduced foreign demand if tariffs make them more expensive overseas.³

• Technology: Many tech firms rely on components made abroad. Tariffs on electronics or hardware parts can raise costs for tech and telecom companies, especially those that manufacture products overseas and sell in the U.S..⁴

Other industries (retailers, apparel, etc.) could also experience higher input costs if the goods they import are taxed. We’ll be keeping an eye on which specific products are impacted.

• Possible market reaction (short term): Markets have a tendency to react swiftly to tariff news. Often, when new tariffs or trade disputes are announced, we see a bout of volatility – stock prices might swing as investors digest what it means for corporate profits. It’s not unusual for the market to drop on trade war headlines due to fears of higher costs and slower economic growth. However, these reactions are usually short-term headwinds. Markets often calm down once the news is absorbed and uncertainty clears.⁵ During the 2018–2019 U.S.-China trade war, for instance, stocks would fall when tariffs were announced but then rebound when negotiations showed progress. In other words, investors tend to adapt once they understand the new rules of the game.

• Long-term impact on your strategy: The big question is, should you change anything in your portfolio or financial plan because of these tariffs? For most long-term investors, the answer is no. Tariffs can certainly be a headwind – they might raise prices (contributing to inflation) or temporarily dent corporate earnings – but they rarely derail a well-diversified long-term investment strategy.⁶ Think of tariffs as one of many bumps on the road. Just as with other market events, we incorporate such developments into our thinking but avoid overreacting. A quote from BlackRock’s strategy team summed it up well: “Tariffs introduce volatility and uncertainty, yet we don’t anticipate them derailing your core investment thesis…impacts beyond a one-time price adjustment generally take months to play out”. ⁷What that means for you: we’ll monitor the situation, but we won’t be making rash moves with your portfolio solely because a tariff went into effect.

In short, the new tariffs might cause some market choppiness and could impact specific industries in the near term. But from a financial planning perspective, our focus remains on the big picture. We’ve built your portfolio to withstand all kinds of market conditions – including trade disputes – by diversifying across asset classes and geographies. If you have questions about how a particular investment or sector in your plan might be affected, please don’t hesitate to ask. We’re here to help make sense of it for you.

1. https://www.reuters.com/article/business/timeline-key-dates-in-the-us-china-trade-war-idUSKBN1ZE1AA/#:~:text=April%202%2C%202018 ↩︎
2. https://www.blackrock.com/us/financial-professionals/insights/tariffs-and-investment-portfolios#:~:text=,ensure%20that%20portfolios%20appropriately%20diversified ↩︎
3. https://www.reuters.com/article/business/timeline-key-dates-in-the-us-china-trade-war-idUSKBN1ZE1AA/#:~:text=April%202%2C%202018 ↩︎
4. https://www.blackrock.com/us/financial-professionals/insights/tariffs-and-investment-portfolios#:~:text=,ensure%20that%20portfolios%20appropriately%20diversified ↩︎
5. https://www.invesco.com/us/en/insights/tariffs-rattle-stock-markets-long-term-impact.html#:~:text=While%20we%20may%20see%20lots,term%20market%20impact ↩︎
6. https://www.blackrock.com/us/financial-professionals/insights/tariffs-and-investment-portfolios#:~:text=Image%3A%20Quotation%20start ↩︎
7. https://www.blackrock.com/us/financial-professionals/insights/tariffs-and-investment-portfolios#:~:text=Image%3A%20Quotation%20start ↩︎