Trade Turmoil: What You Need to Know as a Consumer
Trade tensions are high. Do you know how your wallet or portfolio may be affected?
The U.S. economy has enjoyed a strong stretch of performance, with the current expansion being the longest in the country's history. However, after a decade of growth, international trade tensions have reared their head, flashing unmistakable warning signs.
Increasing trade hostilities have become fodder for news, with American households becoming more aware of global economy trends. They've also become more concerned about what trade relations can mean for their own personal finances. While the degrees of separation between U.S-China trade and your bank account may be vast, the connection is there.
What's the fuss about?
Trade tensions are high, but why? There are a couple major factors at play. Global growth is stagnating, particularly in the developing world, which can set the stage for disputes as countries look to preserve their stability and spur growth.
More importantly, the U.S. has employed tariffs as a major policy tool in negotiations with allies and adversaries alike. Tariffs have not just been used as a lever in trade talks, but also in diplomatic matters. The tactic has pitted the U.S. against many peers of the global economy, most notably China, Mexico, Japan, Canada and the European Union, which has led to retaliatory tariffs and heightened tensions. The strategy has garnered mixed results, but the trade war is a reality both businesses and consumers will have to contend with.
How trade turmoil can affect you
If the headlines about international trade seem as if they hit a bit closer to home, that's because they do. There are two ways in which you can feel the immediate impact of trade tensions, either in your wallet or in your portfolio:
- Tariffs mean higher prices: Tariffs are an import tax. That means any business that may import electronics from China or automobiles from Mexico is paying higher prices to acquire those goods. That's the point of tariffs, to depress demand for those products and thus punish the targeted markets. However, it can also lead to higher prices at the register. Businesses must decide whether to absorb the added costs or pass them onto the customer. That means agriculture products may cost more at the grocery store, or even appliances like washing machines. So long as tariffs are in effect, you may pay higher prices for these goods.
- Trade developments can dent investments: Markets are quick to react to swings in trade sentiments, with stocks potentially plunging or rising on breaking news about tariffs. It can be difficult to protect your retirement savings or investment portfolio from such volatility, especially when losses can materialize quickly and severely. Trade turmoil can also affect bond and commodity prices, in addition to equities. With pressure on all fronts, you may need to take urgent action.
While you can't control the prices you see at the store or the trading of stocks, you can take certain measures to protect your finances during times of trade tumult. The first is to consult with a financial advisor on managing your savings. To learn more about what you can do, contact your local Vectra Bank rep today.