Many of you have been asking us just how the new tariffs on Chinese goods may affect you. In fact, you’ve kinda been blowing up our phone and we totally get it. We shutter at the thought of paying more for an iPhone.

We know we dropped a bomb on you on Monday when we told you that the new tariffs would be on consumer goods, namely all the stuff you love to love. So, we're going to break everything down for you now: The real, the really real, and what you can do so that things don’t get way too real for your investment portfolio and your Rockstud Ankle Strap Pump budget...seriously, Valentino is a basic human right.  

The Real
Let’s recap the latest tariff sitch in case you've been living under a rock and missed it.
  • The U.S. announced a new 10% tariff on $300 billion worth of new Chinese goods. 
  • The twist in this new tariff is that consumers will feel this one. Previous tariffs were on mostly industrial goods. Now, tariffs will be placed on consumer products, things we buy everyday including smartphones, furniture and clothes...and yes...shoes.  
  • There was already a 25% tariff on $250 billion in Chinese imports in addition to duties (another lux term for tax) on imported steel and aluminum, which was not having a positive effect on the economy.

The Really Real
This U.S./China trade telenovela has been eventful and all but if this last round of tariffs actually goes into effect, things could get really real...for all of us...and we don’t just mean shoe shoppin’.
  • Wall Street nerds are estimating that the combined tariffs will slow down U.S. economic growth by an estimated half of a percent, bringing our Gross Domestic Product (GDP) growth rate to 1.7%. 
  • Remember that consumer spending accounts for the largest part of GDP which measures the growth of the country’s economy. If prices on goods are high and consumers cut back on spending, that is a risk for the U.S. economy.
  • Most of the nerds are in agreement that these latest tariff moves increase the risk of a recession within the next 12 months, especially if the new tariffs go into effect. We aren’t officially there yet so there is no need for panic. There is still time for the U.S. and China to come to an agreement before the new tariffs go into effect on Sept. 1stand Trump has been known to back off in the past.  
  • The new tariffs also increase the chances of The Fed stepping in and cutting rates again in September. The Fed cuts rates to ease monetary policy and hopefully balance out tariff drama. 

How Will This Affect You?
The new tariffs have the potential to affect your purchasing power, your savings and your debt.

  • Higher Prices: Yes, the prices of those new shoes could go up. Tariffs make it more expensive to bring goods in from China. 62% of the new products that will be affected are consumer goods including cellphones, apparel, footwear, and toys. Earlier tariffs only effected industrial goods, but this changes things. Some businesses may delay increasing prices and absorb the higher costs themselves. However, if tariffs do go into effect it is likely that prices will increase for consumers. 

What Can You Do?  
So, this really sucks. We haven’t heard of any significant price
increases on consumer goods yet, so you may want to consider
stocking up at Costco and getting cozy with the idea of outlet
shopping...if you haven’t already. 

  • Stock Market Volatility: Stocks took a nose dive off the high board at the news of the new tariffs last Monday and by Tuesday’s close all the major indexes had completed a full round of rehab. Expect this volatility to continue. The market has traditionally had a knee jerk reaction to all tariff announcements but as the trade story plays out, Wall Street nerds don’t expect the waters to calm. 

What Can You Do?  
If you are investing in a 401(k) or other retirement plan, remember that this is long-term investing, which is actually a strategy. When your investment time horizon is over ten years, you have time to recover from market volatility. Also, when you invest in your employer-sponsored retirement plan, you are following a strategy called dollar cost averaging, which is investing the same amount of money over the same time intervals. This allows you to buy more shares when the prices are down.  Whether you have a retirement or non-retirement portfolio, now is a good time to make sure your portfolio is well diversified. Do you have the right mix of stocks and bonds for your risk tolerance and individual financial situation? There are thousands of free online tools that can help you create an asset allocation for your specific situation. If you have a portfolio, chances are the brokerage firm you have your account with or your 401(k) company have these tools also. 

It may also be a good time to look into asset classes outside of traditional stocks and bonds. Alternative investments such as real estate or private equity often represent strategies that are not correlated to stocks or bonds, meaning that their performance is unrelated. While some alternative investment funds like hedge funds or private equity funds often have very high investment minimums (in some cases over a million dollars), there are liquid alternatives that have much lower minimums and are more liquid (hence the name) than traditional alternative investment options. In full disclosure, we are not providing advice on alternative investments. We are simply providing education on another asset class for you to explore and conduct research and determine if liquid alternatives may be appropriate for your specific situation. And as always, please don’t invest in your cousin’s fund because he said he and his friends can triple your money, guaranteed. Whenever you are considering investing in a non-marketable security, always consult a registered investment advisor or other experienced investment professional.

  • Lower Interest Rates: The announcement of the new tariffs means that The Fed may cut interest rates in September to try to alleviate any economic issues caused by the trade drama. This means that credit card interest rates and lines of credit will most likely decrease, and rates on new mortgages and auto loans will be more affordable. 

What Can You Do?
We don’t provide personal finance advice...or any advice for that matter. That being said...If the interest rate on your credit card is reduced, you might want to think about paying that off homie! Just sayin'.