LET'S TALK ABOUT PRESIDENT DONALD TRUMP'S ECONOMIC AGENDA DURING HIS SECOND TERM
Potential Financial Implications of Tariff Actions During Trump's Initial 100 Days
In the initial days of President Donald Trump's second term, his economic strategy revolves around widespread tariffs. These tariffs could potentially affect your wallet.
Trump states that the main objective of the tariffs is to revitalize manufacturing jobs in the U.S. However, he acknowledges that there will be some turbulence as a result of his tariffs.
Several business leaders plan to transfer the costs of these new import taxes to their customers. Interest rates remain elevated as the Federal Reserve is patiently observing the impact of tariffs on the economy before considering a rate cut.
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Costs associated with significant expenditure areas are likely to increase due to tariffs.
Trump's plan for a tariff on all imported cars is predicted to cause a significant increase in the prices of cars and their repairs. Auto tariffs are expected to add over $5,000 to the price of non-luxury cars[2].
The cost of building and repairing homes and renting homes is also expected to rise due to various tariffs applied to imported lumber, stone, copper, and appliances.
Subsequently, car and home insurance costs are expected to climb, as tariffs could lead to a rise in claims costs, which insurers will ultimately recover from customers.
ADDITIONAL INCREASE IN COSTS
It's not just major purchases that will become more costly.
In particular, prices on smaller electronics such as toasters, phones, and batteries are expected to surge. This is because many of these items are made in China, the U.S.'s trading partner with the highest tariffs.
The prices for bigger appliances like refrigerators and hot water heaters are also likely to increase for the same reason. Other objects, such as beauty and personal care items, plastic items, toys, and clothing, are expected to become more expensive.
Fortunately, you may find some relief from tariffs in your grocery bill.
While most fresh fruit and vegetables in the U.S. are imported, the majority are imported from Canada and Mexico, which are exempt from the 25% tariffs due to the USMCA trade agreement.
HIGH INTEREST RATES STILL PREVAIL
The Federal Reserve has held its influential federal funds rate steady thus far this year, while it waits to see the impact of Trump's on-and-off tariffs on the economy.
This is significant because it could affect your borrowing costs on various loans, including credit cards, auto loans, and personal loans.
Fed officials have suggested that they could reduce interest rates as early as June if the economy shows signs of weakening. However, the Fed must balance maintaining low inflation and high employment. Experts indicate that Trump's tariffs could boost both inflation and unemployment, resulting in a conundrum for the central bank to address first.
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- Trump's economic strategy, primarily centered on tariffs, could potentially lead to significant increases in the prices of cars, car repairs, homebuilding, home repairing, and renting homes due to tariffs on imported lumber, stone, copper, appliances, and cars.
- Car and home insurance costs are predicted to climb as tariffs could lead to a rise in claims costs, which insurers will ultimately recover from customers.
- Prices on smaller electronics like toasters, phones, batteries, bigger appliances like refrigerators and hot water heaters, beauty and personal care items, plastic items, toys, and clothing could surge due to high tariffs on goods imported from China.
- You may find some relief from tariffs in your grocery bill, as the majority of fresh fruit and vegetables in the U.S. are imported from Canada and Mexico, which are exempt from the 25% tariffs due to the USMCA trade agreement.
- High interest rates are likely to persist, affecting borrowing costs on various loans including credit cards, auto loans, and personal loans. The Federal Reserve must strike a balance between maintaining low inflation and high employment, as there is a risk that Trump's tariffs could boost both inflation and unemployment.
