Understanding Tariffs: Impact on Personal and Global Economies

Intro/Outro: 00:01:00

Welcome to Money Roots, the podcast where personal finance gets personal. Each week, Amy and her guests dig deep into the world of finance, making it more approachable and understandable for everyone.

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Amy Irvine: 00:01:50

Hello, Money Root listeners. We are excited to be back. Carrie and I are doing a jam session on something that we're giving a lot of questions on and that is tariffs.

Kerry, I don't know about you, but man, I'm getting a ton of questions about this and our meetings with clients and just in general talking with family members.

You know, since we've heard a couple of big things in the news since President elect Trump, prior President Trump got elected, one of the big things that he ran his campaign on was tariffs.

Right after he got elected, there was a big announcement that he proposed putting 25% tariff on goods from Canada, Canada and Mexico and then an additional 10% on China from what they're already, you know, what already exists. How, how about some of the questions you're getting? Are you getting a lot of questions on this topic as well?

Kerrie Beene: 00:02:47

Yeah, a lot of questions on. I think people think of themselves individually, you know, what does this mean for, for me and my wallet or what does this mean for our portfolio?

So some of those more personal questions in the news, it's constantly a big picture topic, but for us it's, it's reaching down and talking about it on a more personal level. And how does it affect our day in and day out lives?

Amy Irvine: 00:03:11

Yeah, so let's talk about that.

Kerrie Beene: 00:03:14

Yeah. How?

Amy Irvine: 00:03:15

Well, in your opinion?

And we can kind of share ideas, but how will if some of these tariffs do get put in place and some of the, you know, the announcements have been manned, how do you think the tariff plan will change things and affect the individual household economies as well as our global economy?

Kerrie Beene: 00:03:34

One of the things that I've read recently and, and maybe heard a little bit on the news is talk around, you know, specifically Mexico and there's been about a trillion dollar in goods that's come across the border in the last year. And if these tariffs potentially go through, there is talk of this could increase some of the consumer cost on core goods.

Which when economists talk about core goods, a lot of times they like to take out food and gas. So some of your other everyday expenses could increase around 1%.

So no, that's a small impact, but it does add up especially for those that are living day in and day out on a little bit tighter of a budget. So it is a little bit concerning.

Amy Irvine: 00:04:26

I always thank you for taking a moment and explaining core goods because what, what hits a lot of our pocketbooks the most is food and gas. Right.

Those are, those are two main, you know, if I look at my budget, I don't know about you, but that's two main spenders in my budget on a monthly basis. You know, it's like what's the biggest amount of money that you spend? It's your home.

You know, if you include taxes and property taxes and insurance and the mortgage and stuff like that. And then the next thing below that, for a lot of, a lot of our clients and for, I think our team's household tends to be food.

So it's kind of funny that that's not brought into consideration.

Kerrie Beene: 00:05:04

Yeah, and it's, to me it's, you know, when they are talking about it and they're saying, well, core goods without food and gas, that's actually after I pay all my bills, that's probably the biggest thing that I look at, especially you know, having an 18 year old son at home. We have a pretty large food bill. So my biggest concern is actually food.

And, and so that's, that is funny and a little bit frustrating when you're trying to think about and forecast some of these things which, forecasting what's actually going to happen is turning out to be a little bit of a juggling game. So.

Amy Irvine: 00:05:43

Well, even some of the foods that we get here in the US Are imported though. And, and, and you know, Canada provides a fair amount of milk to the U.

S and Mexico specifically provides a fair amount of fruit to the US So and actually gas is one of the biggest products that Canada. You know, oil is one of the biggest products that Canada exports to us and we import from them.

So if that, if the proposed 25% tariff actually came to fruition, it could be pretty, pretty impactful from both of those countries on some of our non core goods that you were mentioning.

Kerrie Beene: 00:06:20

Yeah.

Amy Irvine: 00:06:21

So what are your thoughts about.

Because you know, right after Thanksgiving Trudeau kind of, you know, hopped on a plane, flew down and met with President Elect Trump to talk through, through some of the, the language that was being used, and it seemed as though they were able to, to talk some things out. But do you think, what do you think about some of these tactics that are being thrown out there? And, and do you think they'll go through?

Kerrie Beene: 00:06:50

I, you know, I think as, no, really surprise.

I think that possibly, and maybe even hopefully that Trump's using these maybe just as a negotiating starting point and then it maybe can get better from what he's saying. And some of the things he said on the campaign trail, he's already backed off from a little bit. So that's sort of one thought there.

And then I think there's always the question too, like, can he legally do this? And so that's been some of the things that, that we've talked about or whatever.

And it does seem that he, he has a little bit more power than you would think when it comes to that.

And that was a little surprising to me when I was reading about this and studying up on it, as, you know, a lot of things in, in Congress have to jump through a lot of loopholes. But this does seem like that some of his negotiating, you know, he does have a little bit more control than you would think.

So that was one thing that came to my mind as well. Yeah.

Amy Irvine: 00:07:59

I think this is going to be something that, you know, it's, we don't know what the true economic policy is actually going to be.

He has campaigned on growing America, you know, like, how are we going to pay for some of the things that have been proposed, for example, the current tax legislation that's set to expire next year, there's been discussion about continuing, you know, that, that tax law. And when the question has come up, well, how are we going to pay with it? How are we going to pay for it? Excuse me.

Then, you know, there's been discussion about growing the economy. Any thoughts on how tariffs will help grow our economy or how it will help revitalize our economy?

Kerrie Beene: 00:08:42

Yeah, I think that if you kind of take a step back and think about tariffs and why politicians even want to use them as a negotiation tactic or, and it's in the news all the time, is Trump's campaign and often other politicians campaign as they want to focus on increasing American growth and American manufacturing and in really making sure our economy is booming.

And the way to do that is, you know, keep potentially exports that are from competitor or imports from competitors that are causing our American manufacturers, you know, companies and products to Maybe take the back seat.

So the idea is if we increase tariffs on some of the competitors in foreign countries, then that will encourage American products to, you know, be the preferred one.

And that's how politicians kind of negotiate and they tout that, you know, our economy will do better domestically if we, you know, potentially increase tariffs.

One thing that I do think it's interesting is how some of the very specific tariffs that have came up, you know, in the recent years, not necessarily in this campaign trail, but looking back, is there'll be proposed tariffs that are a blanket across the board.

fic thing. You know, maybe in: 2025

hat'll be the big question in: 2025

Amy Irvine: 00:10:55

Right. I mean, it's not the first time that there's been. Trump's first administration put some tariffs in place.

And from what I understand, and I haven't done a ton of research on that, so I just want to be clear on that. From what I understand, those tariffs didn't actually get REM during the Biden administration.

They were still in place during the Biden administration. It's just that this. This particular administration now is. Is thinking about raising it more globally. At least that's been.

Some of the discussion is that it's going to be raised on a more global level. And certainly was a shocking comment to say Canada. And I'm not.

I wasn't so shocked about the Mexico comment, but I was a little bit taken aback by saying. Saying that we were going to raise prices in Canada by 25 or, you know, tariffs. Excuse me, and Canada by 25%, that was a bit of a shocker to me.

I was a little.

Kerrie Beene: 00:11:47

Yeah. Kind of lumping them together is a little surprising.

Amy Irvine: 00:11:50

That is it.

Kerrie Beene: 00:11:50

Yeah.

Amy Irvine: 00:11:51

Yeah.

So thinking about, you know, our global world anymore, I mean, this is something that I think a lot about because we're not, you know, when we're doing portfolio management, we talk about diversification of. Of not just, like, stocks, but also regions. Right.

We talk a lot about having some in US and some in international, and it's become more and more a global economy, especially now, I think, you know, with, with how, how much trades are going in in every different direction. I think there's some concern on both sides if, if we were to make it too painful that it could ultimately impact our consumers. Right.

And that could then could then cause some pain in the pocketbook.

One thing that I think right now, this is just me personally, one thing I think that the current, that I should say the oncoming administration has in their back pocket a little bit is the fact that interest rates right now are on the higher side. Right.

And so if we start to feel some pain or pinch, I would say from any tariffs that are implemented, the Fed has some control over, well, the Fed has control over lowering interest rates to try to speed up the economy if they see it slow it down too quick. Now, we haven't seen that yet. We haven't seen, we've seen inflation come down, but it's kind of holding its own for the most part.

The last couple numbers that have come out have been pretty, pretty in line with what was expected, but not showing any signs of a real recession.

So I do have some, you know, as far as like when people ask me what do you think this will go do to the economy, it's not one thing ever that does anything to the economy. Right. It's all these moving parts that does something.

,: 2025

Kerrie Beene: 00:14:14

No, I was going to say, I think, you know, thinking through what you're saying, it feels like kind of post Covid.

And since a lot of this, it's just been an interesting few years and I think going into the next few years the word balance and figuring out what should we do as individuals and then what should we do as portfolio managers and making decisions on investments, I think it's going to be a balancing act for us as advisors and us as investors. And it's also going to be a balancing act for those making the decisions, you know, with the fed funds rate.

And I think it is going to be a continual topic in the news.

I expect us to hear about it all year long, especially as Trump does enter his presidency and we do see some of These policy changes or I mean policy changes and potentially these tariffs and I think a lot, a lot of these ideas that he's putting out there sometimes feel, and this is not political at all, but it almost feels contradictory like we're going to do this while at the same time this happens. But really if you do one thing then that could negatively affect another thing. So my mind just stays on that word.

Continually making sure things are just balanced from all perspectives.

Amy Irvine: 00:15:48

Yeah. And it's not going to affect everybody the same. Right. There's going to be some retailers that are going to be more impacted than other retailers.

So when we look at, you know, some that have. And again, it depends on what the actual policy ends up being. Being.

I think that's a big thing that people keep saying, what do you think is going to happen? And we're like, you know, what are you doing?

You know, we're like we're not doing anything right now because right now we haven't seen anything that's actual proposed policy. So until we see a very solidified policy that is pos, you know, that's, that's going to be run up the pole, for lack of a better term then it's.

I don't, I don't. I think people hire us so that we don't make those kinds of knee jerk decisions so that we look at all the data and we don't look at it in a vacuum.

We look at it from a global perspective. Yeah. A more. Okay, yes. If this happens, what could offset it? Or if this happens, how does that impact?

And one of the, I mean some retailers can shift much easier than other retailers. And I think there's certainly areas that we need to be keeping an eye on.

One that comes to mind for me and it's, it's one that a lot of people, because the dollar stores that have popped up all over these really rural towns, you know, they've, they've done a really, they've done a really good job finding little pockets of towns that have distance in them, you know, for, for places to get a few groceries or you know, you know, minor things. Right. So I know in our little town of Jasper, you would never in a million years think a dollar store would be successful.

But that place is always busy and we're, it's a very small population. But between Woodhall, Jasper and Shrewsburg, there's nothing for 25 miles.

So it's, you know, it, it really gives those, that unique group of people a place to go. That type of retailer could be very vulnerable.

So there's certainly pockets that could lead to some lower sales projections or that would be impactful to those people that are in that, that area. So we just have to kind of keep an eye on it and see what, what happens if we're, you know, what the policy ends up being.

Kerrie Beene: 00:18:12

Yeah. And, and that's the perfect example of how does it trickle down?

Well, a lot of the Dollar General Store, different stores like that, I don't know what the percentage is, but a, a fairly decent size probably percentage, you know, that's an example of things that could possibly be coming from China. So that's sort of how that trickles down and where that final increase ends up landing. And part of it's going to be on the consumer. Yeah.

Amy Irvine: 00:18:40

And then you think of bigger retailers like Walmart and Amazon and you know, they're, they also have a lot of product that are brought in, they're imported in. Right. But they're so big and they have so much negotiation power that the prices might go up, but they're probably not going to go up as much.

Kerrie Beene: 00:19:01

Right.

Amy Irvine: 00:19:02

Yeah.

Carrie, anything that you, you know, any other like as you've been talking to clients, I, I'm just trying to think of some of the, the concerns, any other concerns that have come up in your conversations or you know, terminology that you think is helpful for people to understand as they navigate what they're hearing in the news right now.

Kerrie Beene: 00:19:24

You know, I think one of the things we always talk about with clients and needs to continue to be on the forefront is understanding your risk tolerance. Because, you know, the last few years you've seen such a heavy, you know, things have performed really well from growth stocks and things like that.

But I think moving forward again, back on my balance word, I think really understanding how you're invested and is it in alignment with your long term goals? I mean, the focus is always on the long term. These are short term things we're talking about.

While it's important to stay educated and up to date on this kind of stuff, it's also important to make sure that you have more of a long term perspective.

And any, any money you don't have that's sort of considered short term, you know, we don't really recommend you have that in the invested in a way that could potentially cause a risk for you. But I think understanding your risk tolerance and what does that really mean?

And then looking at how you're invested going forward and knowing like what percentage of your portfolio is in international stocks is in US equities and remembering that some of the US Companies that are in that US equities classification, they do have international exposure also. So, you know, what does that mean over the long haul?

around how you're going into: 2025

Amy Irvine: 00:21:04

Well, I appreciate that. Two cents. You know, I think that's a great segue to finish the the conversation about this topic because it is short term react.

That's why I said, you know, it's it's important that we don't make knee jerk reactions. We need to see what policy actually brings before we make any decisions about, you know, recommendations that we make.

We thank everybody for listening to this podcast. We hope it was helpful as always. If you have any questions, comments, concerns, we would love to hear from you.

If you find somebody that you think would be interested in listening to this podcast, please feel free to share it with them and we hope you all have a wonderful holiday season, whatever holiday it is that you may celebrate, and we will see you in the new year.

Intro/Outro: 00:21:55

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