Trump’s Tariffs and What They Mean for Your Wallet

Speaker 1 I live in LA now, but lately I have been craving the seasons. Snow, hot cocoa, the whole thing.

Speaker 1 I don't even ski, but I have been daydreaming about working remotely from somewhere really cozy on the East Coast, like a cute little ski town for a little bit.

Speaker 1 And whenever I know I'm going to be gone for a while, I always remind myself that my home can actually be working for me while I'm away because I host my space on Airbnb.

Speaker 1 It is one of the easiest ways to earn passive income from something you already have, and that extra income feels particularly helpful this time of year as we approach the holidays. holidays.

Speaker 1 A lot of my friends say that sounds amazing, but where do you find the time to manage guests and bookings? And that's when I tell them about Airbnb's co-host network.

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Speaker 1 I like to give a personal touch when I'm hosting on Airbnb. So I make a list of my favorite restaurants in the area and I hand write a note welcoming my guests to the property.

Speaker 1 My guests love it, but I also know that some of those little personal touches can take a lot of extra time. So this is the exact kind of thing that you would want your co-host to help you with.

Speaker 1 Whether you're traveling for work or chasing the snow or escaping it, or you've got a second place that just sits there empty more often than you'd like, your home doesn't have to just sit there.

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Speaker 2 Here's one piece of advice that I've given for years. Build an emergency fund.
Aim to stash away enough to cover at least three months of expenses in case your income suddenly drops.

Speaker 2 Sounds simple, right? But let's be honest, it's not. Saving even one month's worth of living costs can feel impossible.

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Speaker 2 Here's one piece of advice that I've given for years: build an emergency fund. Aim to stash away enough to cover at least three months of expenses in case your income suddenly drops.

Speaker 2 Sounds simple, right? But let's be honest, it's not. Saving even one month's worth of living costs can feel impossible.

Speaker 2 Just when you're making progress, that check engine light blinks on and derails your plans. Life already throws enough curveballs.
You don't need your bank adding to the chaos.

Speaker 2 That's why it's so important to choose one that makes savings easy and doesn't nibble away at your hard-earned money with ridiculous fees. QIIME understands that every dollar counts.

Speaker 2 That's why when you set up direct deposit through QIIME, you get access to fee-free features like free overdraft coverage, getting paid up to two days early with direct deposit, and more.

Speaker 2 With qualifying direct deposits, you're eligible for free overdraft up to $200 on debit card purchases and cash withdrawals. To date, QIIME has spotted members over $30 billion.

Speaker 2 Work on your financial goals through QIIME today. Open an account in just two minutes at chime.com/slash MNN.
That's chime.com slash MNN. Chime feels like progress.

Speaker 3 Chime is a financial technology company, not a bank. Banking services and debit card provided by the Bankor Bank NA or Stripe Bank NA.

Speaker 3 Members, FDIC, spot me eligibility requirements and overdraft limits apply. Timing depends on submission of payment file.

Speaker 3 Fees apply at out-of-network ATMs, bank ranking, and number of ATMs, according to U.S. News and World Report 2023.
Chime, checking account required.

Speaker 2 I'm Nicole Lapin, the only financial expert you don't need a dictionary to understand.

Speaker 1 It's time for some money rehab.

Speaker 1 Well, there has been a whole lot going on in financial news while I've been on kind of sort of maternity leave.

Speaker 1 It wasn't hard to pick the first stories to cover as my first episode's back because two of the biggest stories in financial news right now are undoubtedly all things Doge and tariffs.

Speaker 1 Yesterday we covered all things Doge. Today is all about tariffs.
But as always, I'm going to focus on why this matters to you and your microeconomy.

Speaker 1 For starters, the way we talk about tariffs right now doesn't necessarily line up with how they actually work. So it's just worth reminding ourselves what tariffs are without any geopolitical frills.

Speaker 1 Here's the simple definition. A tariff is a tax on imports paid by the company bringing goods into the country.

Speaker 1 So, for example, if you are listening to this on an iPhone, a lot of the components of the device that you're holding in your hand come from China, and iPhones themselves are assembled in China.

Speaker 1 When your brand new ready-for-sale iPhone arrives at a U.S. port, Apple, not the Chinese government, not the manufacturers in China who made the components, but Apple pays an import duty to the U.S.

Speaker 1 government before they can put the iPhone on shelves. Tariff and duty are sometimes used interchangeably, and while they're very closely related, they're not exactly the same thing.

Speaker 1 A tariff is a broader term for taxes on imports or exports, usually set by a government to control trade. A duty is a specific amount of tax owed on a particular product.

Speaker 1 So, in the case of your iPhone, the tariff is the trade policy that sets the tax, and the duty is the actual bill Apple has to pay when those phones hit U.S. soil.

Speaker 1 As we're seeing now, tariffs are bargaining chips countries play against each other in geopolitical negotiations and conflicts.

Speaker 1 When he was campaigning, Trump said that he would introduce a lot of tariffs, and he sure has. The ones of most consequence are the tariffs on China, Mexico, Canada, and steel-producing countries.

Speaker 1 For a long time, the U.S. didn't have to think much about tariffs or duties on goods from two of our biggest trade partners, Mexico and Canada.

Speaker 1 From 1994 to 2020, the U.S., Mexico, and Canada operated under NAFTA, the North American Free Trade Agreement. Under NAFTA, tariffs between the three countries were virtually non-existent.

Speaker 1 And this wasn't just about tequila and maple syrup. Canada, for example, is a massive exporter of natural resources like gas, minerals, and lumber.
An estimated 24% of all U.S.

Speaker 1 steel imports and 60% of U.S. aluminum imports come from Canada.
Remember that because it's going to come up later.

Speaker 1 NAFTA was sunset because critics, including President Trump, argued that it incentivized outsourcing, led to job losses in U.S. manufacturing, and failed to protect American industries.

Speaker 1 Trump renegotiated the deal and in 2020 replaced NAFTA with the United States-Mexico-Canada Agreement, USMCA.

Speaker 1 The USMCA introduced stronger labor productions, especially for Mexican workers, higher requirements for North American car production, and updated digital trade rules.

Speaker 1 The goal was to create a more balanced trade relationship between the three countries while addressing some of NAFTA's shortcomings.

Speaker 1 Trump, like other pro-tariff politicians before him, sees economic reasons for instituting tariffs as well as political ones.

Speaker 1 Trump views tariffs as an easy way to raise revenue without directly increasing taxes on individuals.

Speaker 1 He also sees them as a way to encourage American manufacturing by making foreign goods more expensive, theoretically pushing consumers toward U.S.-made alternatives.

Speaker 1 Tariffs on Chinese goods, of course, have pros and cons, but generally, politicians on both sides of the aisle support tariffs on Chinese goods to some extent.

Speaker 1 When Mexico and Canada enter the mix, things become a little bit more spicy. The difference here is that China and the U.S.
are somewhat adversarial. Mexico and Canada are our homies.

Speaker 1 Canada, in particular, is a close partner of the United States. We haven't had a real fight since 1812.

Speaker 1 So when Trump proposed a sweeping 25% tariffs on products from Canada and Mexico on February 1st, Mexican and Canadian politicians were shocked.

Speaker 1 When Canada and Mexico asked what they could do to avoid tariffs, Trump's demands were initially unclear, except for when he joked question mark that Canada could just become the 51st state, which is a little like joking about cheating on your spouse.

Speaker 1 It's just not funny. And eventually people are going to start asking some hard questions and maybe even go through your phone.

Speaker 1 Then Trump spoke with the leaders of both countries respectively and reached agreements to pause the implementation of tariffs until March 6th, my birthday eve, so long as Canada and Mexico promise to provide more security at the border.

Speaker 1 If a 25% tariff on Mexican products goes through, you can definitely expect to feel it at the grocery store. In 2021, Mexico provided almost two-thirds of U.S.

Speaker 1 vegetable imports and almost half of U.S. fruit and tree nut imports, according to NPR.

Speaker 1 If a 25% tariff tariff on Canadian products goes through, we will also see higher car prices and construction costs.

Speaker 1 Plus, Canadian Prime Minister Justin Trudeau said that he would pass retaliatory tariffs on things like whiskey, cosmetics, and paper products.

Speaker 1 But we don't have to worry about price hikes until the beginning of March when these tariffs are reconsidered.

Speaker 1 On February 1st, Trump also announced an additional 10% on Chinese goods, which he did go through with. China retaliated with its own tariffs on U.S.

Speaker 1 goods, launched an antitrust investigation into Google, which is banned in China, but still does a lot of business there through partnerships.

Speaker 1 And let us not forget the TikTok ban is ticking down in the background. This was all big tariff news.
So I think we all thought we'd read our last tariff headline for a while.

Speaker 1 But then on the 10th, Trump levied a 25% tariff on steel and aluminum globally. And remember, tariffs are taxes paid for by the importing company, not the foreign government.

Speaker 1 There are exceptions for some American companies that relied on foreign steel last time Trump did this. Not this time.
And remember how Trump paused tariffs on Canada?

Speaker 1 Well, they're not exempt from this tariff. And remember, Canada is responsible for a quarter of U.S.
steel imports and more than a half of aluminum imports. So this is a serious hit for them.

Speaker 1 So what does this mean for you? Well, luckily, we do have the benefit of hindsight and can look at the effect of the tariffs Trump implemented in his first term.

Speaker 1 Most economists agree that Trump's tariffs had a mixed effect on the U.S. economy.
However, it is worth noting that Biden did keep a lot of the Trump tariffs in place.

Speaker 1 The tariffs from Trump's first term increased costs for businesses that rely on imported materials. A lot of U.S.

Speaker 1 manufacturers depend on foreign steel and aluminum, and the tariffs meant that manufacturers had to pay higher prices for those materials. Those higher costs were often passed down to the consumer.

Speaker 1 And as a result of retaliatory tariffs from China during Trump's first term, U.S. farmers were hard hit.
In fact, the U.S.

Speaker 1 government had to bail out farmers to the tune of $28 billion in 2018 and 2019 to help offset their losses. In the face of higher costs for businesses, consumers felt the squeeze.

Speaker 1 The tariffs caused price bumps in things like electronics, cars, and even everyday goods like clothing went up.

Speaker 1 Studies showed that American households ended up paying about $1,300 more per year as a result of the tariffs, which definitely did not help inflation. And then there's jobs.

Speaker 1 One of Trump's key promises was to protect American jobs, especially in manufacturing.

Speaker 1 In the steel industry, there was a slight increase in jobs at first, but there wasn't nearly enough to offset the jobs lost in other industries affected by higher material costs.

Speaker 1 One study from the Peterson Institute for International Economics found that for every job saved in steel production, about 16 jobs were lost in industries that use steel.

Speaker 1 That said, the tariffs did force a conversation about trade imbalances, especially with China.

Speaker 1 And while the U.S.-Sino trade war didn't solve all of the problems Trump wanted it to, it did lead to new trade negotiations, including the Phase 1 trade deal signed in 2020, where China basically agreed to buy more American products.

Speaker 1 Just like we have the benefit of hindsight, so does the Trump administration.

Speaker 1 So they will try to implement changes to how they navigate tariffs in order to have more effective tariffs this time around.

Speaker 1 But even so, it is likely that in the short term, we will see higher prices day to day.

Speaker 1 That means it's more important now than ever to make sure the money you have sitting on the sidelines is working hard for you so you can keep pace with inflation.

Speaker 1 This means at the very least opting into a high-yield savings account instead of just a regular savings account.

Speaker 1 If you're not sure where to start, check out my favorite Publix at public.com slash money rehab. For today's tip, you can take straight to the bank.

Speaker 1 Goldman Sachs analysts say that for every 5% tariff, the S ⁇ P 500 earnings per share could fall by roughly 1% to 2%.

Speaker 1 In its simplest form, that means that the returns in the stock market will likely fall if the tariffs in limbo get passed in the beginning of March. The stock market dips.
We know that.

Speaker 1 And in fact, dips are often times when stocks go on sale. So it could be a great time to buy.
It's also a good time to make sure you're diversified. I just mentioned Publix high-yield cash account.

Speaker 1 They also have a bond account where at the time I'm recording this, you can lock in a 6.9% yield, even if the Fed lowers rates.

Speaker 1 In times of uncertainty, personally, I jump at the opportunity to add a little more certainty into my portfolio.

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Speaker 2 Money Rehab is the production of Money News Network. I'm your host, Nicole Lapin.
Money Rehab's executive producer is Morgan Lavoie. Our researcher is Emily Holmes.
Do you need some Money Rehab?

Speaker 2 And let's be honest, we all do.

Speaker 2 So email us your money questions, moneyrehab at moneynewsnetwork.com, to potentially have your questions answered on the show or even have a one-on-one intervention with me.

Speaker 2 And follow us on Instagram at MoneyNews and TikTok at Money News Network for exclusive video content. And lastly, thank you.
No, seriously, thank you.

Speaker 2 Thank you for listening and for investing in yourself, which is the most important investment you can make.