Tariff Tantrum Thoughts

First off, apologies for sending another email this week. These “bonus” ones only come out when something big is happening. I think the last two days in the market qualifies. As always, below are some thoughts in bullet point format.

• Dollar struggles
1. After the election the US Dollar strengthened. There was hope of tax cuts, deregulation and economic growth.
2. Under normal circumstances a tariff increase would also strengthen the Dollar. Apparently, these are not normal times as the Dollar has lost value.
3. The world market is basically saying for now the risk of a global recession has increased enough the US Dollar is not as strong as it was a few months ago.
4. Then to make matters worse, our Secretary of Commerce, Lutnick, comes out and says they do not have a plan for the US Dollar. Genius!
• Speaking of Lutnick, he was quoted as saying the tariff formula is based on all the work of their teams of economists. I have no doubt there are a ton of highly qualified economists in the Federal government. Something interesting I read this morning is if you ask ChatGPT the best way to calculate a tariff on another country to get the balance to zero it kicks out the same formula. It also adds a warning that reads - "while revenue-matching tariffs might feel 'fair' on paper, they'd likely lead to economic inefficiency, international backlash, and serious harm to the superpower's own economy and global trade system." I have no clue which one came first.
• Side note – I ran to the store early this morning. There was someone loading their cart with all the 12 packs of Coke in cans they could. Coincidence with aluminum cans getting their own special tariff rate?
• The Futures market is now betting between 3-5 interest rate cuts the remainder of the year. The first three cuts are now at greater than 50% odds while the final two are in the 30% range.
• I also mentioned the other day how the market likes certainty. Well, the era of uncertainty continues
1. Tariffs are worse than expected.
2. Aides all went and said nothing will change and then Trump says he may. Then followed this by again saying nothing will change. Does anyone have a whiplash collar? Asking for a friend.
• You have probably heard Congress does have the ability to control tariffs. Will they? I also heard the House will be working through the weekend to take a two-week vacation.
• The Fed Chair has come out and said the tariff plan will likely raise inflation and slow economic growth. And basically they are watching for now because they aren’t seeing much clarity right now.
• California is now trying to negotiate its own trade agreements. They are the 5th largest economy in the world. I can’t blame them.
• Other countries are not backing off. Apparently, they smell some opportunity.
• The Tax Foundation has done a quick analysis of the tariff scheme. Highlights are:
1. Average US household will see increased costs of $1,900 this year.
2. The average tariff on imports will be the highest since the1930s.
3. Tariffs will increase Federal tax revenue by roughly $260 billion this year. This equates to the biggest tax increase since 1982.
4. Over the next decade this tax increase will total nearly $3 billion.
5. US GDP is expected to drop by .7%, potentially 600,000 jobs lost, and after-tax income will drop by just under 2%.
• Another follow-up to my comment the other day about slowing down a train. The opposite is true too. Getting a train to move from a dead stop to top speed takes time. I share this because moving manufacturing back to the US can take years if not decades, especially if the labor force requires specialized training, which we do not offer a lot of. It has been a long time since I have been in a manufacturing plant, but there were a lot of robots back then. I have to imagine there aren’t less now. Finally, getting rid of the CHIPS Act may make things worse since so much has started as a result of this.
• Thursday’s market losses saw just over $3 trillion wiped off the books. Friday doesn’t look much better (I am writing this around lunch).
• So, what kind of advice do I have?
1. Personally, I am revisiting my Index Card of Investing. It includes:
• My patience will be rewarded over time.
• Focus on what I can control, like savings rate.  
2. Realize this is self-inflicted and hopefully can be self-corrected.
3. Spend a little time doing something you enjoy.
4. Take a minute to appreciate something. I’m appreciative of finally being out of my sling for the first time in 6 weeks!
• I am going to end this on a quasi-sales pitch, and I apologize for that because I am not a salesperson. However, we have the capacity to accept 6 new clients this year. If you are or someone you know is looking for a flat fee financial planner who charges based on knowledge, experience and services provided, just send me an email to dan@forwardthinkingwm.com and we can set up some time to talk.