How Tariffs Could Impact Your Investments, Retirement, and Everyday Expenses

In recent months, the conversation around tariffs has heated up once again. With the United States implementing new tariffs on countries like China, Canada, and Mexico, and those countries responding with tariffs of their own, many investors are wondering: What does this mean for my portfolio, my retirement plan, and even my day-to-day budget?

To help you understand, we’re going to walk through what experts are saying, what history teaches us about tariffs, and most importantly, how you can position yourself to weather these kinds of policy shifts without making knee-jerk decisions that could damage your long-term financial health.

What Are Tariffs and Why Do They Matter?

Before we dig into the impact on your wallet, let’s quickly review what tariffs actually are. A tariff is essentially a tax placed on imports. When the U.S. imposes tariffs on goods coming from China, for example, companies importing those goods have to pay extra. In theory, this helps protect domestic industries by making foreign goods more expensive—but it also drives up prices for consumers.

When tariffs are imposed on essential goods—like raw materials, electronics, vehicles, or food, those extra costs often get passed on to you, the consumer. This is why tariffs don’t just affect stock markets; they hit household budgets too.

Tariffs and the Stock Market: What Experts Say

PIMCO’s Perspective:

PIMCO, a globally recognized investment management firm, recently shared insights into how tariffs could ripple through the financial markets. They explained that tariffs don’t just influence companies directly affected by trade; they can have a broad effect across many industries. For instance, higher costs for raw materials can squeeze profit margins for manufacturers, and uncertainty around global trade can sap investor confidence.

Tariffs create uncertainty—and markets hate uncertainty. But, market sentiment has reflected the shared thought that the proposed tariffs may not be long lived but may possibly be used as  more of a bargaining chip to improve the U.S.’s trade terms with other countries.

Northern Trust:

Northern Trust echoed the sentiment that the tariff talks are likely being used as a bargaining chip and are likely to be temporary, similar to what was seen during the first Trump administration. They also added that with Canadian elections coming up soon, the long-term stability of any agreements reached would certainly be in question, making it even less likely that any tariffs would be a permanent fixture.

Goldman Sachs’ Forecast:

Goldman Sachs took it a step further, putting some hard numbers on the potential impact. According to their research, every five-percentage-point increase in the U.S. tariff rate could reduce S&P 500 earnings per share by 1% to 2%. If tariffs remain in place for an extended period, Goldman’s models show the S&P 500 could decline by around 5% in the near term.

However, if tariffs are lifted quickly, the impact could be much smaller. This reinforces a central theme: the longer tariffs drag on, the bigger the potential market impact.

JP Morgan’s Long-Term View:

Even with all the tariff turbulence, JP Morgan believes U.S. equities will continue to outperform global markets in 2025. Their outlook emphasizes the resilience of the U.S. economy, strong corporate earnings, and the relative attractiveness of American stocks compared to other regions.

Why Investors Should Avoid Overreacting

Despite all these warnings, the message from seasoned financial advisors is clear: Don’t panic. Don’t make drastic changes to your portfolio just because of short-term policy shifts.

Cliff Ambrose’s Advice:

Cliff Ambrose, a federal retirement consultant and founder of Apex.com, advises against frequent trading based on headlines. Jumping in and out of the market to “outguess” policy changes often leads to bad timing and unnecessary fees. Trying to predict short-term market movements rarely pays off.

Behavioral Finance and the Cost of Emotional Investing

The Oxford Risk Research and Analysis firm found that emotional, knee-jerk reactions to market swings cost the average investor around 3% per year in returns. In years like this—filled with tariff headlines, political uncertainty, and economic crosscurrents—the risk of emotional investing and greater losses is even higher.

That 3% may not sound like much, but compounded over decades, it can make a staggering difference in your retirement nest egg.

Invesco’s Timeless Advice: Stay Calm, Diversified, and Carry On

Invesco sums it up beautifully: “Stay calm, diversified, and carry on.” In other words, build a portfolio designed for all-weather investing—one that factors in not just tariff risks but recessions, inflation, geopolitical turmoil, and other unpredictable shocks. Then, stick with it. The truth is that investing carries with it many risks, some known and some unknown.

A stock market investor is never fully aware of every possible situation or event that could negatively affect their portfolio. There are many that could, but few actually do. Furthermore, stock market corrections provide an opportunity for companies to adjust, economies to recover, and both parties to regroup and lay the foundation for future growth. The path forward and upward is not a straight line, so stay calm, diversified, and carry on.

Tariffs and Your Household Budget

While the stock market implications get most of the attention, many Americans are more concerned about how tariffs will affect their daily expenses.

How Much More Could You Pay?

While it’s incredibly difficult to estimate the impact of tariffs on consumers, there are two studies that may offer some insight and perspective:

• Axios projects that tariffs could cost the average household an extra $830 per year.
• The Peterson Institute for International Economics puts the number closer to $1,200 per year.

These are broad estimates, and the actual impact will depend on the specific products you buy. If you purchase a lot of imported goods—electronics, vehicles, or appliances, for example—you might feel a sharper sting. Households that spend mostly on domestic goods could be less affected.

Building a Personal Financial Safety Net

Whether or not tariffs hit your household directly, they underscore a fundamental financial planning principle: Build flexibility into your budget.

That means:

• Keeping an emergency fund large enough to cover unexpected expenses.
• Avoiding high-interest debt.
• Living below your means so you have room to absorb price increases.
• Maintaining a savings habit—even if inflation eats into your purchasing power, consistent saving is critical for long-term success.

Should You Change Your Investment Strategy?

This is the million-dollar question—and the answer is almost always: No.

The best investment strategy is one built for you—your risk tolerance, your retirement timeline, your personal goals. If your portfolio was designed thoughtfully, tariffs (or any other short-term event) shouldn’t send you scrambling to make changes.

Ask Yourself Two Key Questions:

1. What’s the maximum decline I could emotionally tolerate in my portfolio?
2.  When will I need to start withdrawing money from my investments?

If you need money soon—or you can’t stomach much volatility—you may need a more conservative allocation. But if retirement is still many years away, or if you’ve built a portfolio that has layered in risk for different time horizons (i.e. a bucketing strategy), then it’s likely best to stick to your plan.

The Real Key: Having a Plan

The best defense against economic uncertainty isn’t guessing what the market will do next—it’s having a comprehensive financial plan. This plan should include:

• A clear retirement timeline.
• A diversified investment strategy aligned with your goals and risk tolerance.
• A cash reserve for emergencies.
• A spending plan that accounts for inflation and other rising costs.

If you don’t have a plan—or if you’re not sure your investments match your plan—it’s time to sit down with a financial advisor.

What to Do Next

If tariffs (or any other headline) have you feeling anxious about your investments or your retirement, take a deep breath. This is exactly why working with a financial advisor can be so valuable. We can help you:

• Review your existing portfolio and ensure it aligns with your plan.
• Stress-test your plan for inflation, market downturns, and yes—tariffs.
• Make sure you’re not overreacting to short-term noise.
• Focus on long-term success, not short-term fear.

Schedule Your Free Call Today

If you’d like a free portfolio review or want help building a retirement plan that gives you confidence (no matter what the headlines say), click below and schedule a call with our team. It’s completely free—and it could make a world of difference for your financial future.

Final Thought: Worry Less, Plan More

Tariffs, recessions, elections—there will always be something to worry about. But worry is not a strategy. Planning is. Build a plan, stick to it, and let the noise fade into the background.

Want more help? Let’s chat.