The markets are taking a big hit today, primarily due to the new tariff structure that’s just been implemented. I want to walk you through what’s happening and share some historical context and thoughts on where this might be headed.
There’s a lot of emotion and anxiety out there, mostly because of the uncertainty around these tariffs. So, let’s take a quick walk through American history on this topic, and I’ll offer a few insights along the way.
A Little History on Tariffs
Until 1913, the U.S. didn’t have a federal income tax. We ran the entire federal government on tariffs, and they were actually a net positive for our economy. We charged other countries for selling goods into a booming, growing American economy.
That changed in 1913 with the introduction of the income tax. Between then and World War II, tariffs fluctuated. But after the war, things shifted dramatically. The U.S. became the dominant economic force globally. We took over naval dominance from the British, rebuilt economies like Japan and Germany, and essentially became the world’s economic engine—a position we still hold today.
But over the last 70 years, what used to be a net positive has shifted. Instead of the world paying to access our markets, American companies are now paying hundreds of billions—some estimates even say over $2 trillion—to sell into foreign markets. That’s a massive net drag on our economy.
What’s Happening Now
This administration is trying to reduce federal spending—estimates range from $1 to $2 trillion. They're aiming to avoid cutting entitlements and are likely to address military spending and interest payments on federal debt. They're also targeting fraud, waste, and abuse.
The challenge? Cutting spending reduces GDP. That money still pays salaries, keeps households running, and fuels economic activity.
So, they need to find ways to add revenue back on the other side of the ledger. There are four main levers they're pulling:
Cutting Regulation
This is a long-term play. You can change regulations today, but the economic benefits won’t materialize for 3–10 years. That doesn’t help in the next 18 months, especially with a national election just 20 months away.
Tariffs
This is a short-term lever. If current trade imbalances cost the U.S. economy $1–2.5 trillion, even clawing back 20–50% would be significant. The strategy here is to impose tariffs so other nations are incentivized to negotiate. Ideally, both sides agree to eliminate tariffs altogether—true “fair trade,” not just “free trade” in name only.
Tax Equalization
U.S. companies pay significantly more in foreign taxes than foreign companies pay to the U.S. For example, U.S. companies paid the Chinese government about $350 billion last year, while Chinese companies paid about $50 billion to the U.S. That’s a massive disparity, and addressing it could recapture hundreds of billions of dollars for our economy.
Economic Growth
Tariffs can also drive growth. For example, a foreign car manufacturer might now face a 10–25% tariff unless their vehicles are made in the U.S. So they may choose to build a plant in the U.S.—say in Iowa, Indiana, or Arizona—hiring American workers and investing billions into the economy. That’s a win.
What’s the Bigger Picture?
This administration—yes, I’ll say it, the Trump administration—is trying to rebalance the books. They’re cutting spending and finding ways to generate revenue, something we haven’t seen attempted at this scale in modern times. The trade and tariff imbalance has been building since the 1950s, and attempting to reverse that trend is bold and, frankly, risky. But this administration has never been risk-averse.
So expect major moves over the next 2, 4, even 6 years. With millennials aging into their peak earning years and AI boosting productivity, there are strong tailwinds for the U.S. economy. More efficient government and reduced spending could accelerate that—but not without short-term volatility.
A Word to Our Clients
If you’re retired, rest assured—we’ve already planned for multiple years of your cash flow. Your portfolio is structured to weather this.
If you’re nearing retirement, we’re building those cash flow plans now, with the early years of retirement in mind. You’re not navigating this alone—we’re planning ahead so you don’t have to worry about short-term market swings.
As always, if you have questions—on this or anything else—please don’t hesitate to reach out. We’re here to answer your questions, support you, and help you accelerate your wealth and your purpose in life.
Thanks so much.