No Winners in a Trade War: How Tariffs Hurt Markets and Consumers

As you may have been hearing recently in the News, U.S. stock marktes have been facing turbulence after the Administration announced new tariffs and escalation of trade tensions. Usually, this particular kind of action is framed as a strategy to protect domestic industries, but the truth is that it only causes higher costs, market volatility, and economic strain.  

There are no winners in a trade war, yet there are two guaranteed losers: the consumer and market participants! 

How Trade Wars Affect The Market 

Trade Wars cause a negative strain to the market because it causes uncertainty and disrupts the supply chain of goods. When tariffs are imposed on certain goods, the companies have to either absorb the extra costs, or pass them onto the consumer. You can bet on the latter usually. This leads to inflation and pushes the Federal Reserve to considering raising interest rates in attempt to control those rising prices. As the cost of borrowing increases, economic growth is further slowed. This affects businesses, investments, and consumer spending. When the cost of goods rises due to tariffs, everyday necessities—from groceries to electronics—become more expensive. This reduces purchasing power and negatively impacts household budgets.

What’s Next for Investors?

With increasing trade tensions, market participants (you) should brace for continued volatility. Investors should keep an eye on inflation trends and Federal Reserve policies for a better idea of market movements. Most importantly, do not panic.