Tariff Troubles
An Excerpt from Our 1Q2025 Newsletter to Clients
Why are Tariffs Implemented?
Tariffs have long been used as a tool to protect domestic industries or generate government revenue. When implemented carefully, they can be effective. But if mishandled, they risk disrupting the global economy and spark retaliation from trade partners and isolate America from the global marketplace.
Economic Effects
Economists generally view tariffs skeptically, as they often lead to higher costs for businesses—costs that are usually passed on to consumers. This can slow economic growth and increase inflation, and create stagflation. It could also lead to a recession. President Trump’s tariff policy has generated immense uncertainty and we had one of the sharpest two-day declines in history in early April with stocks now near bear market territory.
Tariffs in 2025
The Trump administration’s plan assumes that tariffs will open the door for new more favorable trade agreements. However, if negotiations drag on, we could see continued volatility, market losses, and economic uncertainty which could cause a man-made recession. Alternatively, the worst could be over and we may avoid a recession and stocks can rebound from here as these policies are implemented.
The government has signaled plans to offset the impact of tariffs through lower energy costs, tax relief, and reduced interest rates. There’s also a broad expectation that businesses will not pass the full burden of these tariff costs to consumers. Who knows if any of this will work? We hope it does, but the risk and uncertainty are creating upheaval.
The content of this blog is for informational purposes only and should not be construed as investment, tax, or estate planning advice. Skyline Advisors, Inc. is an SEC Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where representatives of Skyline Advisors, Inc. are properly licensed or exempt from licensure. If indices are referenced in marketing material, it is important to note that these cannot be invest in directly, any vehicle such as Passive index-based ETFs and Mutual Funds which attempt to replicate indices have internal expense ratios and other associated costs that would negatively impact returns. No advice may be rendered unless a client service agreement is in place. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital.