What are tariffs? Tariffs are a taxes on goods imported from other countries and, which, increase the cost of imports, making foreign goods less competitive in the marketplace.
With regards to the economy, the U.S. is less dependent on trade compared with many of its largest trading partners. Total trade, in exports and imports, represents roughly 25% of U.S. GDP in 2023 compared with 73% of GDP (Mexico) and 67% (Canada) respectivly. Therefore, the United States economy is better cushioned from the impact of tariffs. However, tariffs can exacerbate inflation.
How does this impact investments? Diversified portfolios are designed to minimize risk, while certain asset classes that comprise them may respond differently to policy shifts. That said, there are still many unknowns. To be safe, revise your budget, reduce your expenses, and create more income.