Navigating Market Volatility: Understanding the Impact of Tariffs

As we continue to navigate the complexities of the global economy, it’s essential to stay informed about factors that can influence our investment strategies. One such factor is the implementation of tariffs and their impact on financial markets.

Tariffs are taxes imposed on imported goods and services, designed to make foreign products more expensive than domestic alternatives. While they aim to protect domestic industries and address trade imbalances, tariffs can also lead to increased costs for consumers and businesses.

When new tariffs are announced, financial markets often respond with heightened volatility as investors need to recalibrate expectations about future corporate earnings. Industries directly affected by tariffs, such as manufacturing and technology, may experience immediate price movements as investors assess the potential impacts.

Prolonged tariffs can affect economic growth and inflation, limiting the Federal Reserve’s flexibility in its policy decisions. This can create a challenging environment for investors, as market sentiment may shift rapidly in response to new developments.

Prior to “Liberation Day” on April 2, 2025, the Trump administration implemented the following tariffs:

• Canada and Mexico: 25% tariff on all goods, with exceptions for USMCA-compliant items.
• China: A 20% tariff on all imports.
• European Union: A 200% tariff on wine and champagne.
• Steel and Aluminum: A blanket 25% tariff on all imports.
• Automobiles and Auto Parts: A 25% tariff on imported vehicles starting April 3 and on certain auto parts by May 3.

On “Liberation Day,” the Trump administration, under the International Emergency Economic Powers Act of 1977 (IEEPA), implemented additional tariffs, including:

• 10% tariffs on all imported goods beginning on April 5, 2025, at 12:01 a.m. EDT.
• Individualized reciprocal higher tariff on countries with which the United States has the largest trade deficits, beginning on April 9, 2025, at 12:01 a.m. EDT.
• Certain goods are exempt from reciprocal tariffs.
  • Steel, aluminum, autos and auto parts already subject to tariffs
  • Copper, pharmaceuticals, semiconductors, lumber, bullion and energy
  • Minerals that are not available in the United States

At Westwood Wealth Management, we are committed to helping you navigate these uncertainties. We continuously monitor market conditions and adjust our strategies to manage risk and capitalize on opportunities. Our diversified approach aims to provide stability and growth in your portfolio. We emphasize the importance of remaining focused on a long-term investment plan and maintaining a well-balanced asset allocation. It’s crucial not to let short-term market fluctuations drive emotional investment decisions. Staying disciplined and adhering to your long-term strategy can help you achieve your financial goals.

Please attend our webinar on Friday, where Adrian Helfert, CIO of Wealth, will go over the implications of the tariffs on the markets and economy.