Since President Trump took office for the second time in 2025, tariff talks are all the rage and markets have entered a new phase of extreme volatility.
Since tariffs can be a good and a bad thing, we think it’s necessary to have some additional context beyond what the mainstream media seems to be focused on specifically - which is higher prices and inflation.
To understand the potential economic impacts moving forward and how these tariffs might affect markets and your investment portfolio, we need to zoom out and take a look at more than just the current headlines.
More specifically, I discuss:
- What are tariffs in layman’s terms, and why do they exist?
- What are the potential impacts of tariffs?
- What has happened historically with tariffs in the U.S. and how did the stock market react?
- What happened to inflation and the stock market during President Trump’s first term and his “America First” trade policies?
- What can happen with inflation and volatility in the stock market when tariffs are increased?
- LISTENER QUESTION: Collecting Social Security Benefits while working and when benefit payments adjust for additional years of earnings.
Resources From The Episode:
The Key Moments In This Episode Are:
02:06 What are tariffs and why do they exist?
03:24 Potential impact of tariffs
04:05 Historical facts about U.S. tariffs
06:50 Potential impacts of tariffs on your investment portfolio
07:55 What happened the last time President Trump’s Administration increased tariffs?
15:21 Listener question: Collecting Social Security while working and benefit adjustments
Since president Trump took office for the second time in 2025, tariff talks are all the rage, and markets have entered a new phase of extreme volatility. Since tariffs can be a good thing and a bad thing, I think it's necessary to have some additional context beyond what the mainstream media seems to be focused on, specifically which is higher prices and inflation. To understand the political impacts moving forward and how these tariffs might affect markets in your investment portfolio, we need to zoom out and take a look at more than just the current headlines.
Hello, and welcome to the Retired-ish podcast. Today, we're diving into a topic that has shaped global trade, shaken up financial markets, and definitely spurred some political debates. And, of course, that is tariffs. We also have a great listener question regarding collecting Social Security benefits while continuing to work. That is a very common question, and there are some nuances to it. So make sure you stay tuned for that.
Tariffs might remind you of your boring old economics textbook from high school or college. But trust me, they have real-world consequences, from higher prices at the checkout aisle to wild swings in your investment portfolio. I want to cover why tariffs exist, how they impact businesses and consumers, and, most importantly, what they mean for your investments. Specifically, how do tariffs influence inflation and overall market trends?
[00:02:01]:
So, let's start with a brief economics recap from your good old days and start by defining tariffs. Think of tariffs as the toll booths of international trade. They are taxes or duties that are slapped on imported goods by a government. For example, if the U.S. imposes a tariff on Chinese goods, then when those goods come over to the U.S. to sell, the U.S. taxes them.
Why do they exist? Governments use tariffs as a sort of like a multitool for economic strategy. They can protect domestic industries, for example, the auto industry or agriculture. I mean, you name it. They can boost domestic production, aiming to create more jobs in the country. They generate revenue, of course, similar to the way they generate revenue from the income taxes you pay, and those revenues can be used to fund other projects or pay down government debt. They can reduce dependence on foreign goods and countries. And as you have already seen with the current administration under President Trump, they can even be used to play hardball in global trade negotiations. So what's the impact of all this? Well, for starters, tariffs often lead to higher prices for consumers.
[00:03:22]:
They shift trade relationships with other countries for better or worse, and they influence economic growth. Since tariffs can be a good and a bad thing, I think it's necessary to have some additional context beyond what the mainstream media seems to be lasered in on specifically, which is all about higher prices and inflation. And to understand the potential impacts and outcomes moving forward and how they might affect markets in the investing landscape, we need to zoom out beyond just the current media headlines.
First, let's look at some interesting facts about tariffs and what history has shown us so far. Over the last forty years, the average effective U.S. tariff rate has stayed impressively low in the single digits. This is thanks to a mixture of trade deals and the rise of more sophisticated global supply chains. And surprisingly, the U.S. keeps its tariffs relatively low compared to other countries as well. The average tariff rate across all imports sits at around just 3.3%, while other large countries and big trading partners such as the European Union, China, and India play with higher numbers and hit importers with steeper taxes, which are around 5%, 7.5%, and 17%, respectively.
[00:04:48]:
But there's no one-size-fits-all approach. Each country's tariff strategy is shaped by its own trade policies, economic priorities, and a dash of political maneuvering. Over this same period, the tax revenues that the U.S. received from tariffs also remained fairly low, representing only around 2% of overall federal receipts. The vast majority of that revenue comes from income taxes.
Another interesting fact is that imports from other countries vary from state to state in the United States. It's not one size fits all on imports into the U.S. For instance, in 2024, Canada was the largest exporter to 22 of the 50 states, even though Mexico was the overall largest exporter to the United States. Canada and Mexico dominate trade with the U.S. in its top two imported products, which are automobiles and crude oil, and while China takes the lead as the primary supplier of technology imports like computers and smartphones.
[00:06:01]:
And on the flip side, Canada was the largest destination for total U.S. exports, although Mexico was the largest for nine states in particular. So, in summary, the U.S. economy relies less on selling goods to other countries compared to its top five trading partners, which depend more on exports to drive their economic growth. For this reason, I think the current administration is using this to its advantage to renegotiate trade policies and increase revenues. So while a sudden increase in tariffs is a great evening news story, it's part of the administration's larger plan to increase revenues, to pay for other items on their agenda, whether right or wrong, such as further tax breaks, etcetera, or not doing too much additional damage to the debt ceiling.
So, while your portfolio may take a hit initially due to the sudden news and fear and uncertainty, in the longer term, these tariffs may not have as big an impact as you think. Imagine a possible situation where first, your portfolio gets hit while we enter a trade war, then out of nowhere, we get even more tax breaks and the markets rise, or suddenly, all major trade between countries is completely renegotiated, and all of a sudden, we have a new treaty. There's a whole host of outcomes that could happen, which can offset what's resulted so far from the recent tariff talks, as has already happened in recent history. That being said, let's go back and take a look at what happened with tariffs during President Trump's first term.
[00:07:42]:
And I'm not saying I agree or disagree with what he did or will do. I'm just explaining the facts. I think understanding what happened before is helpful because, just as with many other things in life, we tend to suffer from recency bias, and our thoughts and emotions tend to stem from things that just happened a short while ago. These tariff negotiations aren't new, although the manner in which they are being used might be. You may have completely forgotten that we've already seen similar tariff wars play out not too long ago. Remember that during President Trump's first term, which was from 2017 through 2021, similar to today, tariffs became a major economic issue. His administration launched a pretty aggressive trade policy that they dubbed America First, where they imposed billions of dollars in tariffs, and shockingly similar to today, particularly targeting China, the European Union, Canada, and Mexico. The U.S. slapped tariffs on hundreds of billions of dollars worth of Chinese goods.
They were saying that there were unfair trading policies and intellectual property theft. China then retaliated with its own tariffs on U.S. exports, especially hitting our agriculture. This back and forth basically led to significant trade tensions and, naturally, a lot of volatility in the stock market. You will sometimes get significant volatility, especially when the economic landscape is uncertain. I would argue that regardless of what's happening now, it's always uncertain.
Anyways, the U.S. also imposed steel and aluminum tariffs on the European Union, Canada, and Mexico, which led to, once again, retaliatory tariffs on American goods, which in turn increased prices for some U.S. businesses and consumers like you and me. Sound familiar? Then, of course, we had the U.S.-Mexico-Canada agreement, the USMCA, which replaced NAFTA. So, lots of similar things were going on, and there was no shortage of fear and uncertainty even then, especially in the markets.
[00:09:56]:
But, of course, what about inflation? What happened last time with that? Despite the fear that tariffs would drive up prices significantly, inflation actually remained relatively tame during Trump's first term. Why is that? Well, businesses absorb some costs, supply chains adjusted, and other economic factors like innovation, automation, and at the time, lower oil prices helped keep inflation in check. The consumer price index or CPI, which is the gauge with which we measure inflation with, averaged around 2% at the time, which is not much different from historical norms and is the level at which our economy seems to operate pretty efficiently.
Now, does that mean that the same thing will happen this time? No. Absolutely not. Which is exactly why the markets have become so volatile. It's not that we know for certain that the tariffs will hurt consumers for years to come and drive inflation, but rather the uncertainty of what can happen. What I find extremely interesting about this is that this phenomenon right here is exactly why people buy stocks or should consider buying stocks.
[00:11:11]:
When you buy stocks, you are buying ownership in the world's largest, most profitable, cash-rich, innovative, and nimble businesses run by some of the smartest and hardworking people on the planet. These public companies essentially have one job, and that's to please shareholders, which would be you, by driving the stock price up over the long run and creating value or returning cash back to shareholders via dividends and or share buybacks. So when things like tariffs, inflation, new presidents, new laws, higher taxes, new competitors, whatever the current challenge may be, hits these companies, they have thousands of people that go to work every day to do whatever they can to help the company prosper and overcome these obstacles. In other words, the issues I just mentioned come and go and always will. And by investing and owning stocks for the long haul, you're allowing other people to handle these obstacles for you while you go about living your life. Yes. If there are higher prices for certain goods, you'll feel it in real time because it will increase your expenses. But, the earnings of the businesses you own in your portfolio via stock should outpace inflation over the long term, and your portfolio can still grow.
[00:12:35]:
In the short term, however, the value of these companies can be all over the map, again, due to the unknown. And if your portfolio goes up over the long run, you can adjust the income you receive from the portfolio to help you pay for the increased expenses. In short, stocks help you battle inflation, which might remain stubbornly high or increase due to outside forces such as tariffs.
So now that we know what happened with inflation and we have the benefit of hindsight, how did the stock market react last time the Trump administration used tariffs as a negotiating tactic? Well, markets reacted negatively to the various tariff announcements, as we would assume, causing short-term volatility. Again, so far, pretty similar to what's happened so far these days. Overall, we know that the stock market actually surged during Trump's first presidency. However, there were many other factors that contributed to that, such as tax cuts, deregulation, and very strong corporate earnings by many of the largest companies in the United States. In other words, they were continuing to make money.
Then came a global pandemic that shocked the world economies and threw a wrench in everything. Talk about uncertainty. Next to nine eleven, that was one of the biggest shocks we've experienced in recent history. Once the pandemic hit, all the worries about tariffs went straight out the window, and we were on to the next major headline. Almost no one cared anymore. Again, I'm not saying to completely discount tariffs and that they won't have any effect on anything in your life or affect your portfolio in any way. They definitely will, and things may not play out similar to last time. But what I want you to do is be careful of accepting the fate of the recent fear-mongering media headlines without looking at everything else that either is happening or could happen. Sometimes, uncertainty ends up benefiting you, especially as a long-term investor.
[00:14:42]:
Alright. Before we close out the episode today, I want to address a recent listener question regarding Social Security. Remember, guys, if you have a question you want answered on the show, you can find the link to the Retired-ish website in the episode description, and you can type or literally record your questions straight from your phone. It's super easy. So be sure to check that out. This question comes from Tony in California. Tony asks. I just turned 67 years old in February of 2025, and I'm considering filing for Social Security benefits to help fund a real estate investment project that I'm treating as partially an investment and partially a project for me to work on in my free time. I plan to continue working for the next five years or so and expect my income to be about double what I earned in 2024.
Wow! Awesome, Tony! Not sure what you did there, but good for you!
I'm wondering whether my higher income could replace one or more of my lower earnings years already used in my Social Security benefit calculation, and if so, how long it would take for any increase to be reflected in my monthly benefit. Also, I would like to know if any money I earn after I turn 70 when the extra 8% stops accruing, would still be considered for potential benefit increases or if the Social Security Administration ignores earnings after benefits begin at age 70.
Alright. That's a bit of a loaded one, but that's a great question. Thank you for submitting.
[00:16:20]:
This is definitely one that can help a lot of other people out there. So, let's unpack this. Every year that a worker has earnings that would be taxed by Social Security through payroll taxes, the Social Security Administration reviews your, what we call, earnings record to determine whether or not your new earnings are high enough to replace one of your 35 highest earning years that you've had in the past in order to calculate your benefit. If you don't have 35 total years that you've paid into Social Security, then whatever you earned recently will just count as one of the 35. No harm, no foul. If your new earnings were to replace one of your previous years, so you already had 35 years and you just completed a working year and you earned more than any one of those years, it's gonna end up replacing it, replacing the lowest. And if that happens, your monthly benefit would increase. However, the adjustment will be applied in December of the following year.
For example, if your 2025 earnings replace a lower year in your benefit calculation, the higher monthly benefit would first be payable beginning in December 2026, which, by the way, would be reflected in the January 2027 payment. Also, the administration should issue a retroactive lump sum payment that covers the benefit increase owed all the way back to January 2026 in this scenario. Now, if you keep working, this process essentially repeats every year no matter what your age is, and it actually does not stop at age 70, regardless of whether or not you are already collecting your benefits. It's pretty interesting, actually. Well, at least to a nerd like me. Also, I think it's important to note that since you're 67, Tony, you're past your full retirement age, which means you will not get any temporary reduction in benefits even if you continue working. However, for the rest of you out there, if you're under your full retirement age, you will have a temporarily reduced benefit if you start collecting while also continuing to work. The reduction can vary based on how close you are to your full retirement age.
[00:18:57]:
Like, if you're in the year that you turn your full retirement age, it's a little bit different. So, for everyone listening, just keep that in mind. Hopefully, that answers your question, Tony. Thanks again. I also believe the administration has a page or two on their website that might explain this and might actually have examples as well. So, if I didn't fully answer your question, I might start there. Or, of course, you can send in another question, and I'll do my best to answer it in a future episode.
[00:19:27]:
That does it for today's show. If you find the topics discussed in the show actionable and insightful, do yourself a favor and subscribe to or follow the show on your podcast app. That way, you can get alerts each time a new episode drops. Also, be sure to check out our free Retired-ish video newsletter to get more useful information on retirement planning, investing, and taxes once a month straight to your inbox. The newsletter will often dive deeper into some of the topics discussed on the show as well as useful guides and charts available for download. As always, you can find the links to the resources we have provided in the episode description right there on your podcast app, or you can head over to retiredishpodcast.com/67. Thanks again for tuning in and following along. See you next time on Retired-ish.
Disclosure [00:20:36]:
Cameron Valadez is a registered representative with, and securities and advisory services are offered through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.
The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual.
To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
Cameron Valadez is a registered representative with, and securities and advisory services are oferred through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC.
The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual.
To determine which strategies or investments my be suitable for you, consult the appropriate qualified professional prior to making a decision.
Get your free
RETIREMENT PLANNING QUICK GUIDES [PDF]
Get instant access to several free PDF flowcharts and checklists that cover a wide range of topics that today's retirees face from retirement planning basics, Roth conversions, healthcare, taxes, and even what to do when your parent passes away.
"*" indicates required fields
