Tariffs, Trade, and Your Portfolio: What You Need to Know

For 2025, we have been indicating that one of the most significant themes for the year would be uncertainty and volatility. The upheaval of the market in recent weeks, on the back of US President Trump’s April tariffs announcement, has certainly exemplified this. The outcome of the current tariff showdown remains uncertain, which is negatively impacting public markets as well as consumer and corporate confidence, thus increasing the risk of a global slowdown. In short order, things are a bit frozen.

The past few months, the market was baking in some of the anticipated “reciprocal” tariffs. What was announced were tariffs far greater than anyone thought possible.

On April 2nd, 2025, President Trump declared that foreign trade and economic practices have created a national emergency, and his order imposes responsive tariffs to strengthen the international economic position of the United States and to protect American workers, resulting in an initial 10% tariff on all countries, which was to take effect April 5th, 2025, at 12:01 a.m. EDT.

Additionally, he imposed an individualized reciprocal higher tariff on the countries with which the United States has the largest trade deficits. All other countries will continue to be subject to the original 10% tariff baseline, which was to take effect April 9th, 2025.

The other part of the conundrum was the formula used. It’s not relevant to try to weed through this except to understand the formula used to assess the number of tariffs that had some major flaws. In a nutshell, it calculates the net exports (export minus import) divided by that country’s imports to us.

Firstly, it is hard to understand why it would correlate to punish a country for simply being a larger importer to the US vs. our exports as a silo approach.

Secondly, in the denominator, they use “phi” to represent elasticity of import prices at .25 — or 25 cents on the dollar passing through to consumers — again, in a nutshell. Whereas many economists indicate it’s really a .90 and that it’s closer to a 1-to-1 ratio of passing through every dollar of tariff to the end consumer in prices. It was quite a shock that this formula was used.

So, where are we now? The U.S. economy has been riding a financial roller coaster since these announcements. Trump announced he was pausing some tariffs and increasing those targeting China a week later, driving stocks upward temporarily before they tumbled again as the White House confirmed 145% tariffs would be placed on goods from China.

Though Trump announced a pause for many of the tariffs he introduced on April 9th, the White House confirmed that many remain in effect, including:

• 20% tariffs previously imposed on China, now totaling 145% with latest announcements.
• A baseline tariff of 10% that took effect April 5 for trading partners targeted in Trump’s announcement April 2nd. Canada, Mexico, Russia, North Korea and others do not have a baseline tariff.
• Tariffs on steel, aluminum, and autos remain unchanged.
• The EU tariff remains at the 10% baseline that took effect April 5th. An additional 20% tariff on the EU is paused.
• Fentanyl tariffs on Canada and Mexico remain unchanged — USMCA trade is tariff-free, non-USMCA trade is tariffed at 25% (except for energy and potash, which is tariffed at 10%).
• The baseline 10% did not take effect on Canada and Mexico on April 5th, and neither country is getting the 10% baseline now.
• A tariff on countries importing Venezuelan oil remains in effect.

Keep in mind this is very fluid, and changes are occurring swiftly.

Later on April 11th, updated guidance from the U.S. Customs and Border Protection carved out an exemption for smartphones, computers and other electronic imports including hard drives, memory chips, flat-panel television screens, and semiconductors. In a Cabinet meeting April 10th, Trump said all tariffs would be put back in place if deals with other countries were not made.

In volatile times, it’s good to remind ourselves of a few lessons we’ve learned from past volatility:

1. Corrections are healthy, and we have an intra-year decline of 14% on average every year.
2. Time is your friend if you are thoughtful in your wealth strategy going into the volatility.
3. Diversification and rebalancing are key long-term strategies.
4. The volatility that has hit markets recently has been stark — and perhaps unusual in that it has been prompted by a single economic policy announcement — yet it is far from unprecedented in scale. While each crisis has its own characteristics and there are certainly challenges ahead, they will not be completely unlike challenges we have seen across previous market cycles. We take comfort in the diversification and disciplined portfolio construction that underpins our portfolios, and drawing on experience, we will stay attuned to emerging opportunities that often accompany market volatility.