It looks like some tariffs will be imposed this week. Imposing a tariff is like using a chainsaw instead of a paring knife to cut an avocado; crude, messy, and generally ineffective.
The impact of tariffs, while garnering extreme headlines, seems to be muted, based on information from several research sources:
- The Tax Foundation states that the proposed tariffs on China, Canada, and Mexico could reduce long-run GDP by a combined 0.45%.[1]
- The Tax Policy Center [2] and the Peterson Institute[3] both estimate that consumer after-tax income could decline by $930–$1,200, or roughly 1% if imposed for the entire year.
- The Federal Reserve Bank of Atlanta noted that the costs of consumer spending could rise between 0.81% to 1.63% with the Canada, China and Mexico Tariffs.[4]
These studies conclude that the actual impact to consumers will depend on whether higher prices can be passed through by importers and the extent that any retaliatory tariffs are imposed. While the impact in dollars and cents may not seem large in aggregate, they are pocketbook issues that directly affect consumer confidence, consumer psyches, and behaviors.
Consumer spending is roughly two-thirds of U.S. GDP. Tariffs, if imposed over long periods of time tend to increase prices, slow growth, reduce employment, reduce productivity and increase distrust among friendly nations. Consumer uncertainty can quickly build to discomfort and then to anxiety.
It was only five years ago when we were faced with a pandemic and true economic stress. Two years ago, several banks, including Silicon Valley Bank, failed due to rising interest rates and poor capital controls. Today’s economy is not facing anything even close to those situations. Our focus then was on the long term, on diversification, strategic portfolio management and financial planning. We believe those fundamentals were as important to financial success then as they are today.
[1] Tax Foundation, https://taxfoundation.org/research/all/federal/trump-tariffs-trade-war/
[2] Tax Policy Center, https://taxpolicycenter.org/daily-deduction/tariffs-are-here-now-what#:~:text=Over%20ten%20years%2C%20blanket%20tariffs,(%243%2C280%20in%20a%20year)
[3] Peterson Institute, https://www.piie.com/research/piie-charts/2025/trumps-tariffs-canada-mexico-and-chinawould-cost-typical-us-household
[4] Atlanta Federal Reserve, https://www.atlantafed.org/-/media/documents/research/publications/policy-hub/2025/02/28/01–tariffs-and-consumer-prices.pdf
