TRUMP'S TARIFF TIRADE
What a week it has been—actually, what a whirlwind the last 48 hours have been! Given recent developments, I wanted to share my thoughts with clients and friends of EntryPoint Wealth Management. My goal is to offer some perspective that may help you navigate these changes with a more positive outlook. I’ve kept this discussion as factual as possible, steering clear of political debates—because, frankly, they’re not helpful.
The State of the Middle Class
Since I was born, every politician has promised to help middle-class families. It’s a familiar refrain during election season. Yet, despite these promises, no leader has truly delivered meaningful improvements for the middle class. Unfortunately, most politicians—on both sides—are influenced by deep-pocketed donors and lobbying entities. It’s a sad reality.
Here’s a look at the significant economic policies of past presidents in my lifetime:
- Reagan: Championed trickle-down economics with tax cuts, which may have helped some, but also created major loopholes benefiting wealthy families and business owners.
- Clinton: Passed NAFTA with Republican support, leading to 30 years of wage stagnation as corporations optimized global supply chains, seeking lower wages and tax advantages.
- Bush: Lacked a clear domestic economic agenda. Policies like No Child Left Behind focused on education, while the Patriot Act addressed security issues.
- Obama: Prioritized social and healthcare reform, passing the Affordable Care Act (ACA). While it ensured guaranteed payments to medical providers, it primarily benefited large insurance companies (just look at their stock prices). Meanwhile, my insurance from the exchange was expensive and had terrible coverage.
- Trump (First Term): Implemented tax cuts that benefited working Americans, but the COVID-19 pandemic created massive economic disruptions, and his initial response helped trigger the inflation we saw under Biden.
- Biden: Oversaw post-pandemic recovery and the highest inflationary pressures in decades. The cost of living surged by over 20%, effectively weakening the purchasing power of every American.
Trump's New Tariff Policy: What It Means
Now, enter Trump’s latest tariff policy. He’s doubling down on his first-term approach, slapping higher tariffs on more countries. The intent is clear: incentivize American-made goods. But what does this mean for us? Let’s break it down.
The Cons of Tariffs
1. Stock Market Volatility
Wall Street and most media outlets have been vocal in their opposition, blaming Trump for rattling the stock market. The argument is that tariffs increase costs for businesses, making it harder to sell goods and ultimately lowering corporate profits. It’s pretty much that simple and accurate, expect a prolonged repricing event.
2. Inflationary Pressures
A common argument is that tariffs fuel inflation. But let’s be honest—we’ve already lived through historic inflation over the last four to five years. Additionally, the U.S. government routinely devalues our currency, causing hidden inflation. The Federal Reserve aims for 2% annual inflation, meaning your dollars are constantly losing value, whether it’s obvious or not.
The Pros of Tariffs
1. Leveling the Playing Field
Why should the U.S. allow foreign countries to charge tariffs on our goods while we do not tax their goods? It’s not FAIR-TRADE if we aren’t establishing an equal trading environment. Trump’s push could force a rethink of lopsided global deals and create more revenue simultaneously.
2. Boosting Domestic Jobs & Wages
For decades, Main Street has suffered while Wall Street has thrived. Jobs have been outsourced, wages have stagnated, and purchasing power has eroded. Restructuring trade relationships to prioritize domestic production can create jobs and increase demand for labor—ultimately leading to higher wages.
3. Increased Government Revenue
The U.S. consumer is the most powerful economic force on the planet—no other country spends like us. These tariffs will generate substantial revenue for the U.S. Treasury, helping fund Trump’s proposed tax overhaul. Eliminating taxes on overtime, tips, and Social Security would be a significant shift in our tax system, yet few are discussing its potential impact.
4. Lower Interest Rates
As a real estate investor, Trump has made it clear he wants lower interest rates. The housing market has been frozen, with mortgage rates above 6%. A potential side effect of a tariff-induced economic slowdown is that interest rates could decline—stimulating future economic growth. We’ve already seen the 10-year Treasury yield drop below 4%, nearly half a point since last week.
What's Next?
Trump has taken a bold “shock-and-awe” approach to policy implementation, but one thing is certain—he pretty much does what he says. His campaign promises have become a reality, such as using DOGE to cut government spending, facilitating Ukraine’s mineral deal, and working on resolving the Russia-Ukraine conflict. Trump’s negotiating style is consistent: he applies pressure and waits for concessions. Whether it takes weeks or months, he’s likely to see this strategy through.
EPWM's Investment Strategy
At EntryPoint Wealth Management, we are adjusting portfolios accordingly:
- We sold our technology overweight positions in mid-February, securing substantial gains from our MAG7 exposure since late 2022.
- We minimized our small- and mid-cap domestic stock holdings due to increased market risks.
- We shifted equity allocations toward cash, gold, and fixed-income investments to enhance diversification and mitigate portfolio risk.
If you’d like to continue this conversation about your situation or learn how EntryPoint can help you, please contact me at Chris@EnryPointWM.com.
