SAN ANTONIO – Over the last week, the stock market has experienced significant fluctuations in response to President Donald Trump’s tariffs.
The Dow Jones Industrial Average saw falls and spikes, aligning closely with tariff announcements.
Trump imposed 145% tariffs on imported goods from China while pausing tariffs for 90 days on other countries.
Dr. Taylor Collins, an associate professor of economics at the University of the Incarnate Word, explains the complexities of tariffs.
“At a foundational level, tariffs tend to be bad for consumers because they are a tax, and taxes increase the cost of consumption,” Collins said. “The upside of them is that they can potentially help producers bring more production back into the domestic economy and create domestic jobs.”
So, why is it crucial to bring manufacturing jobs back to the U.S.?
“Let’s just get an example from COVID a few years ago,” Collins said. “We have diplomatic cables from China that said they were going to cut off the shipment of all personal protective equipment to the U.S. unless they got favorable political discussions going that helped their end of the negotiation table … It really does heighten our vulnerability.”
Collins also mentioned that although bringing manufacturing to the U.S. would benefit, inflation will take effect before those jobs become available.
This imbalance could make it more difficult for families living paycheck-to-paycheck to keep up with cost changes in the meantime.
While the president’s goal is to bring manufacturing to the U.S., the rise and fall of tariffs have had a swift impact on the stock market.
The Dow Jones took a hit of more than 1,000 points on Thursday, April 10, just one week after dropping around 4,000 points between April 1 and April 3.
JJ Montanaro, a military affairs financial advice director for USAA, discussed the implications for long-term investors.
“For someone who has a 401(k) account and is 25, 30, or 35 years old, with literally decades to go before they retire, this should just be all extraneous noise in terms of the ups and downs of what we’re seeing in the market,” Montanaro said.
However, this may be different for someone in their 60s or 70s, much closer to retirement.
“If someone is a year out, two out, or six months out from retirement, this would be much more relevant in terms of what’s happening to them,” Montanaro said. “Having cash in hand makes a lot of sense.”
He clarified that ‘cash in hand’ does not mean having thousands of dollars in cash at home.
Instead, it means ensuring some money is in a checking or savings account rather than having 100% of funds tied up in the stock market, at least until conditions become more certain.
