Last week, President Donald Trump announced he will invoke a legal provision that will allow him to impose a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum.
Since then, there’s been confusion and uncertainty over how the proposed tariffs could impact the U.S. and countries around the world. Could the tariffs start a trade war? And if so, could that be a setback for an economy that has been humming along in recent years?
With an ever-changing news cycle, it’s hard for consumers to navigate rapidly evolving policy decisions, not to mention whether or not the North American Free Trade Agreementrenegotiations would deter President Trump from issuing the tariffs. But assuming the tariffs are levied, you might be wondering what changes you can expect.
While some possible outcomes are clear-cut, others remain uncertain. The tariffs could potentially benefit workers in the aluminum and steel business. But, on the other hand, the risky move could also trigger inflated prices on consumer products or weaken the global economy, which would hurt everyone. Keep reading to discover how the tariffs could affect your finances.
Your retirement accounts may go down. If the stock market continues to slide, your investments could eventually take a turn, too. The day that Trump made the tariff announcement, the Dow, S&P 500 and Nasdaq fell more than 1 percent. But it wasn’t all bad; for instance, many steel stocks did go up. Still, it’s too early to make any concrete predictions on how your retirement savings could take a hit from these tariffs.
Inflation could make a return. While prices are always climbing, inflation rates have remained remarkably steady and low for years, generally hovering around 1 and 2 percent since 2009. But the steel and aluminum tariffs would change that if things go as badly as some economists predict.
“Any industry that is a net user of steel is an immediate loser. The automobile industry, the canned food industry [and] the soft drink industry come to mind immediately, as their costs just went up. And, of course, these costs will be passed on to consumers,” says Robert Johnson, president and CEO of The American College of Financial Services, a nonprofit that offers advanced planning education for financial advisors that’s based out of Bryn Mawr, Pennsylvania.
Matthew Shay, president and CEO of the National Retail Federation, relayed similar sentiments in a statement: “Make no mistake, this is a tax on American families. When costs of raw materials like steel and aluminum are artificially driven up, all Americans ultimately foot the bill in the form of higher prices for everything from canned goods to electronics and automobiles.”
Your job may be at risk. A lot of industry experts fear that the tariffs could set off a trade war, with other countries levying their own tariffs in retaliation. That could lead to job losses.
For instance, Europe has already announced that if Trump puts tariffs on imports of steel and aluminum, Europe will place tariffs on Harley-Davidson motorcycles, bourbon whiskey and Levi’s jeans – all products the U.S. exports. And if it’s harder for American companies to sell their products because demand is lessened, they may have to trim back their number of employees.
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Doreen Edelman, a District of Columbia-based co-leader of the global business team at Baker Donelson, a national law firm, warns that the tariffs could negatively impact workers and the U.S. economy. Edelman, who has been advising clients on imports and exports for a quarter of a century, says if the stock market continues to go downward due to fears over a trade war, or if a trade war actually breaks out, then “this could cause job losses and hurt families.”
Many global industry leaders have also put out ominous statements. For instance, Jim McGreevy, the CEO and president of the Beer Institute, said in a statement: “According to third-party analyses, this 10 percent tariff will create a new $347.7 million tax on America’s beverage industry, including brewers and beer importers, and result in the loss of 20,291 American jobs.”
The tariff could also negatively impact companies that rely on business with other nations.
“For instance, Canada has a thriving auto plant base and vehicles assembled there need supply of raw material and subassembly input that constantly goes across the border between the U.S. and Canada and Mexico. In some cases, the back-and-forth may occur even up to a dozen times [with one car] and any increase in costs due to cross border flow tariffs would destroy the current state of the industry,” says Haresh Gurnani, the executive director of the Center for Retail Innovation at Wake Forest University School of Business in Winston-Salem, North Carolina.
You may keep or acquire a new job. Some good may come out of tariffs, says John Boyd, Jr., a principal at the Boyd Company, a corporate site selection company with clients that include Boeing, PepsiCo, Visa International and HP.
“From my vantage point, I see the tariffs as providing more tailwinds for the reshoring trend,” he says. “Many of our automotive, aerospace and medical device clients are getting the message that this is not the time to be offshoring production. We see a lot of expansions in the months ahead, especially in low-cost markets in the Southeast. In fact, we have never seen more interest amongst our clients to cancel planned moves offshore and instead expand production here at home.”
The tax reform bill has helped with that, Boyd adds. In other words, if you were concerned that you could lose your job due to your company relocating, fret not: Your odds of keeping your job may go up. Even if the tariffs don’t materialize, you may retain your job simply from the message it sends to employers.
You will likely feel economically unsettled. Consumer confidence may be shaky for a while if the tariffs are issued. And while tariffs seem inevitable, they may not be: business groups and Republican lawmakers have tried to stop President Trump from levying tariffs on steel and aluminum imports. Whatever happens, it may take some time before it’s certain if the tariffs will ultimately go into effect.
[See: 9 Ways to Invest Under President Donald Trump.]
“Companies that manufacture in the U.S. with imported steel and aluminum are concerned,” Edelman says. “Yet how can they plan if they don’t know how long the tariffs will last or what will happen next?”
That’s the question many consumers are asking, too.