Tariffs

I already didn’t care much for basketball… but Florida v. Houston showed me that I really couldn’t care less. The game is currently background noise while I write this. 

Wednesday, April 9th @ 10:30PM EST: I guess I have to start adding timestamps to all our letters now. I am adding this short blurb because Trump has delayed his “reciprocal” tariffs 90 days after I was done writing. For the record, the 10% flat tariff, insane 125% tariff on China, and the Canada + Mexico tariffs are still in place. Everything below still applies if the tariffs ever do come into effect. Especially number 5.

Monday, April 7th @ 10:00PM EST: I know you are sick of hearing about tariffs and might immediately delete this. I will start with the most important thing to keep in mind as the stock market crashes:

It is too easy to look back and see when you should have sold. It is nearly impossible to look to the future and predict the right time to re-invest. 

This time more than any, I urge you, stay the course. Bull markets make good investors. Bear markets make great investors. 

We are currently living through financial times that are being compared to the Great Depression - not the Great Recession of 2008 and not the COVID crash of 2020. It is hard to overstate the potential impact of the Trump Tariffs. If the tariffs are not lifted or changed, we could be in for an economic period worse than the Great Depression. 

I like to believe this won’t happen, but it is a possibility. So let’s clear up a few things:

1. These are NOT reciprocal tariffs despite what Trump’s poster said. The Trump Administration likely asked Chat GPT (or Grok) for the easiest formula to account for all the ways other governments support their domestic production in addition to direct tariffs. ChatGPT said to take each trade deficit divided by the total US imports to that country. When you repeat this for each country, you get a specific percentage that reflects how much more the US imports from a country versus exports. The Trump Administration then divided that number by two. 

   • Reciprocal tariffs would say - this country imposes X% tariff, we will do the same.

   • If you then coupled this with aggressive government action to encourage domestic production, we could level the playing field. 

   • From the White House announcement, they address non-tariff measures with this one sentence near the bottom: 

   • “This builds on his broader economic agenda of energy competitiveness, tax cuts, no tax on tips, no tax on Social Security benefits, and deregulation to boost American prosperity.”

     • The irony of claiming to cut taxes in the same press release that details the largest tax increase in history would be funny if not so tragic.

     • Don’t hold your breath on deregulation. 

2. These tariffs will only increase domestic production if companies believe these tariffs are here to stay. It costs billions of dollars and years of construction to reshore production. Then, companies have to keep prices higher to pay for those costs. If the tariffs are removed within the next ten years, they will likely face unsustainable competition. 

   • This is why tariffs alone are not enough. 

   • Does anyone believe these tariffs will last for ten years? The messaging has investors on the edge of their seat. On Monday, April 7th, there was a $7 trillion dollar swing in 30 minutes with “fake” reports of a tariff pause. 

   • The markets are selling like tariffs are here to stay and praying for the tiniest sign of relief. 

3. They did place tariffs on countries entirely inhabited by penguins. That must be what they are talking about all huddled up in a big circle. 

4. The tariffs were placed without any question or debate about why a trade deficit exists. Trump and his administration saw a deficit and moved to the next country.

   • The largest recipient of tariffs is Lesotho. A tiny South African country entirely surrounded by South Africa with a near 100% trade deficit with the United States. 

   • Lesotho’s 2023 GDP is $2.118 billion which is $2,600 per capita.

   • USA’s 2023 GDP is $24.977 TRILLION which is $74,600 per capita.

   • The United States imports diamonds and textiles (for jeans).

   • Does the Trump administration want Lesotho to start buying $38,000 F-150s???

   • What is the end goal with this tariff? 

   • At least with penguin island, they came up with some excuse about loopholes. 

   • Does Trump think we can start mining for diamonds in the United States?

5. Even if tariffs are lifted tomorrow, the damage done by these tariffs might be irreparable. Our allies feel attacked, retirees’ 401ks will not recover for years, and developing nations will doubt our stability as a trading partner. 

   • The 2026 midterms are going to be Rough (with a capital R) for Republicans. 

6. Sorry for being so depressing. Please enjoy some funny things that made me laugh:

7. Okay, my last comment, Trump loves to say something like “I placed tariffs in my first term and there was no inflation. The same thing will happen now.” In my mind, that is like saying “I stabbed you in the leg, and you lived. If I shoot you in the face, you will also live.” These tariffs are so much worse than his first term, you shouldn’t compare them. 

This period is proving the importance of increasing your bond allocation as you get closer to retirement. 

Nobody knows what will happen over the next few months or years (least of all, Trump). You cannot control the market, but you can control your behavior and investments. Stay the course. Continue to invest and check on your diversity of assets (domestic v. international; stock v. bonds). It is too easy to look back and see when you should have sold. It is, dare I say, impossible to look to the future and predict the right time to re-invest. 

This time more than any, I urge you, stay the course. Bull markets make good investors. Bear markets make great investors.

Call to Action

I will say it a third time, stay the course. Continue to invest. If you are young, your portfolio has time to recover. If you are getting close to retirement, check your bond and stock allocation mix to insulate some of your investments.

Debrief on Deck

Next week, we will hopefully talk about Black Rock but who knows.

As always, please reach out to us with any questions or comments you have. You can reply directly to this email or find us on Instagram.

Until then, stay the course.

Disclaimer