A non-political discussion on tariff's impact [Locked with explanation]

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thermo86
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A non-political discussion on tariff's impact [Locked with explanation]

Post by thermo86 »

[Locked. Please see my message about this topic below - Alex Frakt]

Would like to hear from others who may be more versed in this area of economics and if the 25% will likely be immediately passed onto the consumer via product price increases, or if we may see these tariffs be passed onto consumer in a more pro-rated manner.

Actionable items:
- Probably a good idea to top of oil barrel now?
- Maybe make any car related expenses now related to service/new vehicle purchase?

Other notable considerations?
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Re: A non-political discussion on tariff's impact

Post by bikefish »

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Re: A non-political discussion on tariff's impact

Post by carolinaman »

I am a conservative but I think this is ill advised against our North American trading partners. There are better ways to achieve whatever results are being sought. We will find out how dependent we are on goods from Mexico and Canada. Think fresh fruits and vegetables, cars, car parts, oil, consumer products and many other products.
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Re: A non-political discussion on tariff's impact

Post by Gubshu »

I track my grocery expenditures carefully. When I shopped yesterday, prices on a number of items were significantly higher. Produce prices had risen quite a bit. I assume this was in anticipation of the tariffs. We eat a lot of fresh produce, and we are going to really feel the pinch.
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Re: A non-political discussion on tariff's impact

Post by jebmke »

Gubshu wrote: Sat Feb 01, 2025 10:28 am I track my grocery expenditures carefully. When I shopped yesterday, prices on a number of items were significantly higher. Produce prices had risen quite a bit. I assume this was in anticipation of the tariffs. We eat a lot of fresh produce, and we are going to really feel the pinch.
Probably not; Elon hasn't deployed the self-picking fruit and vegetable plants yet.

note: if I recall correctly, it has been quite cold in the south this last month so it could be that some stuff was affected.

At our local produce market I did see some fresh cherries from Chile that were the size of eye-balls; I've never seen cherries that big before. I don't recall how much they were.
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thermo86
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Re: A non-political discussion on tariff's impact

Post by thermo86 »

Gubshu wrote: Sat Feb 01, 2025 10:28 am I track my grocery expenditures carefully. When I shopped yesterday, prices on a number of items were significantly higher. Produce prices had risen quite a bit. I assume this was in anticipation of the tariffs. We eat a lot of fresh produce, and we are going to really feel the pinch.
You have my curiosity. Mind sharing a high-level view of your grocery tracking strategy?
Last edited by thermo86 on Sat Feb 01, 2025 10:35 am, edited 1 time in total.
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Re: A non-political discussion on tariff's impact

Post by cheese_breath »

carolinaman wrote: Sat Feb 01, 2025 10:11 am ... We will find out how dependent we are on goods from Mexico and Canada...
Yes. Especially manufactured goods that we don't have the capability of manufacturing at home anymore.
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Re: A non-political discussion on tariff's impact

Post by Jack FFR1846 »

I've been keeping very on top of all of this. What I'm seeing directly:

Stellantis has cancelled a move of a product line assembly plant to Mexico. (Ram) Other vehicles from Jeep, Chrysler, Dodge are moving, sometimes just across the water from Windsor, Canada to Detroit. In addition, of course, Carlos Tavarish, the former CEO was booted (he said he resigned) and there's wide talk of the CJDR brands being split off and sold to be separate for the US traditional brands. We don't get government subsidies like Fiat, Peugeot and other European companies. The result of this plus Stellantis's plan to reduce MSRP on existing inventory by 35% means that if you want a Jeep or the like, you should wait. It won't be built outside the US and because they went up on MSRP over the last 5 years more than any company besides Hyundai/Kia, they do have room to drop the MSRPs by this much and still make money.

Porsche and Lamborghini are rumored to be building US factories. So if you're itching for a sports car, either buy right now or wait.

The "most US content" cars lists tend to be dominated by Tesla, Toyota, and Honda. Cars like your grandfather's Buick has a factory in China. Tons of factories in Mexico. You'd probably need to expand what car you want if you plan to wait. I can tell you that I've been considering a new Jeep Wrangler Unlimited Rubicon and they're all made in Toledo, Ohio. I do not know the percentage of parts made outside the US and expect Jeep (along with others) will be attempting to replace foreign parts with US parts.

I suppose we're going to have to wait to see how parts in cars affect their final MSRP. But every car company knows that they have to compete. The threat of tariffs before the change in administration had companies scrambling. The Jeep plant making Wranglers in Toledo had shut down most shifts and laid off tons of workers. They're back to full shifts with laid off workers called back. When that $65k Rubicon drops to $42,250 (35% drop), I will be at the dealer immediately buying. I'm sure they know this and so are starting up the factories again to replace inventories that certainly are currently still bloated.

Oh, and if you're ok with a 2023 new Ram, rumblings are that they're going to be 50-60% drops in MSRP. I've looked around out of curiosity and already see them at 25% off.
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Re: A non-political discussion on tariff's impact

Post by rockstar »

Let’s say you buy a belt from China for $100. The US puts a 10% tariff on that belt. That belt is now $110 if the seller passes on the entire tariff to the customer to maintain the margin. Now, you can choose to not buy the belt at the higher price, which would impact the company selling you the belt’s sales.

For Mexico and Canada, you’re looking at higher grocery store costs, higher vehicle costs, and higher gas prices particularly in the Midwest. The refiners are set up for the crude from Canada.

Since the price went up, inflation is also going up. This should push up yields on bonds. And the Fed should ultimately raise rates instead of lowering them. Higher rates negatively impact equities, so equity prices should go down.

Basically nothing good comes from them unless you can produce the same stuff state side at the price before the tariff. And that’s not possible.
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Re: A non-political discussion on tariff's impact

Post by Big Jim24 »

We're not in the market for a new car soon, but my daughter eats pancakes for breakfast every day. Gotta get some make syrup today!

I'm well-stocked on tequila already. :sharebeer
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Re: A non-political discussion on tariff's impact

Post by rockstar »

Big Jim24 wrote: Sat Feb 01, 2025 10:43 am We're not in the market for a new car soon, but my daughter eats pancakes for breakfast every day. Gotta get some make syrup today!

I'm well-stocked on tequila already. :sharebeer
I’m stocked up for the year. We buy the seasonal maple syrup that Costco sells that is stored in bourbon containers. It’s really good.
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Re: A non-political discussion on tariff's impact

Post by Dontsell1 »

The majority of medical equipment and generic drugs are made outside of America. Drug prices may go up as a result. Equipment costs can’t be so easily passed on as insurance contracts are more fixed. This will result in reduced margins for hospitals and further strain on smaller medical practices.
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thermo86
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Re: A non-political discussion on tariff's impact

Post by thermo86 »

Jack FFR1846 wrote: Sat Feb 01, 2025 10:35 am I've been keeping very on top of all of this. What I'm seeing directly:

Stellantis has cancelled a move of a product line assembly plant to Mexico. (Ram) Other vehicles from Jeep, Chrysler, Dodge are moving, sometimes just across the water from Windsor, Canada to Detroit. In addition, of course, Carlos Tavarish, the former CEO was booted (he said he resigned) and there's wide talk of the CJDR brands being split off and sold to be separate for the US traditional brands. We don't get government subsidies like Fiat, Peugeot and other European companies. The result of this plus Stellantis's plan to reduce MSRP on existing inventory by 35% means that if you want a Jeep or the like, you should wait. It won't be built outside the US and because they went up on MSRP over the last 5 years more than any company besides Hyundai/Kia, they do have room to drop the MSRPs by this much and still make money.

Porsche and Lamborghini are rumored to be building US factories. So if you're itching for a sports car, either buy right now or wait.

The "most US content" cars lists tend to be dominated by Tesla, Toyota, and Honda. Cars like your grandfather's Buick has a factory in China. Tons of factories in Mexico. You'd probably need to expand what car you want if you plan to wait. I can tell you that I've been considering a new Jeep Wrangler Unlimited Rubicon and they're all made in Toledo, Ohio. I do not know the percentage of parts made outside the US and expect Jeep (along with others) will be attempting to replace foreign parts with US parts.

I suppose we're going to have to wait to see how parts in cars affect their final MSRP. But every car company knows that they have to compete. The threat of tariffs before the change in administration had companies scrambling. The Jeep plant making Wranglers in Toledo had shut down most shifts and laid off tons of workers. They're back to full shifts with laid off workers called back. When that $65k Rubicon drops to $42,250 (35% drop), I will be at the dealer immediately buying. I'm sure they know this and so are starting up the factories again to replace inventories that certainly are currently still bloated.

Oh, and if you're ok with a 2023 new Ram, rumblings are that they're going to be 50-60% drops in MSRP. I've looked around out of curiosity and already see them at 25% off.
Are your sourcing your information from general news sources such as WSJ etc...? I ask because if I wanted to follow all this moving forward it would be good information to have.
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Re: A non-political discussion on tariff's impact

Post by Jack FFR1846 »

thermo86 wrote: Sat Feb 01, 2025 10:49 am
Are your sourcing your information from general news sources such as WSJ etc...? I ask because if I wanted to follow all this moving forward it would be good information to have.
Much of this is coming from Stellantis employees who won't be named ever. You can search much of it that comes out in dribs and drabs. Much of the factory moves is pretty common in car industry news and within the unions who are greatly affected.

I will be interested to see how medications are handled. I buy Jardiance from Canada for less than half what I would pay with Medicare. I wonder if this will be taxed through the mail at the border. It's manufactured in Turkey regardless.
Last edited by Jack FFR1846 on Sat Feb 01, 2025 10:55 am, edited 3 times in total.
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Re: A non-political discussion on tariff's impact

Post by nisiprius »

In the past, my casual observation has been that when companies see that there is going to be a price increase in some key thing they use, they raise prices instantly--they don't wait for the effect to hit them directly, they raise their prices instantly in anticipation. A rise in the price of coffee results very quickly in a rise in the price of a cup of coffee at Dunkin', a rise in cacao is followed quickly by an increase in the price of a Hershey bar. A tariff is both a great excuse and a great signal for tacit collusion.
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Re: A non-political discussion on tariff's impact

Post by privateer79 »

rockstar wrote: Sat Feb 01, 2025 10:39 am Let’s say you buy a belt from China for $100. The US puts a 10% tariff on that belt. That belt is now $110 if the seller passes on the entire tariff to the customer to maintain the margin. Now, you can choose to not buy the belt at the higher price, which would impact the company selling you the belt’s sales.
I suspect what happens depends on the alternatives the manufacturer has for that belt based on the market.

if the best alternative is to sell the belt in canada for 80$, the manufacturer might eat most of the tariff to keep selling in the US.
if the best alternative is to sell the belt in Europe for 100$, the Customer will eat most of the Tariff to entice the manufacturer to still ship to the US.
if the margin on the belt is really low, and the manufacturer has no similar markets to sell into, he might make fewer belts, as supplying the US market isn't profitable any more.
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Re: A non-political discussion on tariff's impact

Post by stevewolfe »

We locked in a fill of our heating oil tank last week. We also stocked up on pork, beef and chicken (vacuum sealed in stand up freezer). Other than that, we made sure we purchased all of the electronics we will need (baring failure) for the next few years.
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Re: A non-political discussion on tariff's impact

Post by stan1 »

To keep this properly focused on investing, how could we expect investors in ex US index mutual funds to be impacted? I think the guard rails are off on a lot of assumptions prudent investors have made since the Great Depression. I hope our mods are starting to realize that and will let us try to figure out what happens when very important assumptions we've all made might be changing and "stay the course" might not be the best advice for anyone under 80 (or those above 80 who plan to leave generational wealth). I don't know the answer, not sure if anyone does.
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Re: A non-political discussion on tariff's impact

Post by FeralCat »

A Victory garden with a couple of chickens for eggs is what I need.
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Re: A non-political discussion on tariff's impact

Post by GoldStar »

I already try to find good quality clothing that is made in the US and am willing to pay more for them. I wonder if these tariffs will make such products cheaper (more people might start buying them if cheaply made foreign goods become closer in price creating an economy of scale for US goods). This has me thinking to delay purchasing versus accelerate it.
I have a few other thoughts but don't want to get this thread locked (which is, I am sure, where it will head soon).
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Re: A non-political discussion on tariff's impact

Post by bobn60014 »

Let the run on toilet paper begin!
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Re: A non-political discussion on tariff's impact

Post by Glawen »

In the 1800s, American companies lobbied to increase tariffs, because they protected American industry (and capital investment in that industry) from European competition. Since roughly the 1970s, American companies have overwhelmingly lobbied against tariffs because offshoring industrial production increased profits (and share prices). Since US companies have spent the last 50 years lobbying against tariffs to push their stock prices up, I would expect tariffs to push stock prices down.

On the consumer side, the effect of tariffs on purchasing power depends on whether you are part of the labor force or retired, and whether tariffs are being implemented as part of a coherent protectionist strategy. If tariff strategy is focused on re-shoring industry (ie. Bob Lighthizer's approach, and coupled with industrial policy), it should marginally raise product prices, but raise wages even more (due to increased demand for labor), resulting in a big net increase in purchasing power for Americans currently in the labor force (since labor costs only contribute a fraction to cost of goods and services); however, Americans not in the labor force (eg. retired) would see increased prices which would not be offset by increased wages since they are not earning wages (but somewhat offset by social security inflation adjustments).

It seems extremely counter-productive to put the first and greatest tariffs on Canada and Mexico. Tariffs on these countries are only pushing the value of the Canadian Dollar and Mexican Peso down relative to the dollar which negates any potential protectionist effect by making imports from these countries cheaper. In general, near-shoring (returning industry from Asia to Mexico) should create greater resilience to supply shocks (eg. 2020 supply chain disruptions), and increased wages and demand for labor in Mexico should reduce the incentive for migration to the US from Central America, reducing the supply of labor in the US and driving up wages. Tariffs on raw material (non-manufactured) imports from Canada also seem counter-productive, since these feed US industrial production. All of the above suggests to me that these tariffs are NOT being implemented as part of a broader protectionist strategy. The US government also has absolute control over the governments of Mexico and Canada, which makes the idea of tariffs being used as threats or negotiating chips against these countries extremely absurd; if the current administration wants CA/MX to implement a policy, they can just instruct these countries to do so.

It is difficult to predict the implementation or economic effect of these tariffs, since historically tariffs have been implemented for 3 reasons: 1. collect revenue for the federal government, 2. protect US industrial production, 3. foreign policy leverage tool. The current round of tariffs (or at least tariff announcements) aren't being implemented for any of these 3 reasons, but rather for political posturing and generating news headlines, so I don't think there is a historical analog here to use here for guidance.
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Re: A non-political discussion on tariff's impact

Post by jebmke »

stan1 wrote: Sat Feb 01, 2025 11:11 am To keep this properly focused on investing, how could we expect investors in ex US index mutual funds to be impacted? I think the guard rails are off on a lot of assumptions prudent investors have made since the Great Depression. I hope our mods are starting to realize that and will let us try to figure out what happens when very important assumptions we've all made might be changing and "stay the course" might not be the best advice for anyone under 80 (or those above 80 who plan to leave generational wealth). I don't know the answer, not sure if anyone does.
IMO you don't try. One should always view their financial situation and understand what could be the impact of an external shock, whether it is trade, a pandemic, a financial crisis, a burst asset bubble or whatever. It is nearly impossible to predict what will be that shock and what the impacts will be so I don't even try.
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Re: A non-political discussion on tariff's impact

Post by Mike Scott »

Markets will continue to be volatile until the news and immediate impacts settle which could take months to years. Markets will continue to be volatile for many other reasons as well. Check your personal risk tolerance. It does seem like inflation may stay above long-term target rates for longer than desired for multiple reasons. I don't expect permanent market disruptions due to this specific event but interest rates and the cost of goods and services may creep up rather than stabilizing or decreasing short-term. What am I doing in response? Nothing in particular. My plan is pretty well baked. My kids looking at buying houses are in a tight spot but that's nothing new for first time homebuyers.

What is the alternative? Panic sell everything, buy and bury gold in the back yard?
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Re: A non-political discussion on tariff's impact

Post by KlangFool »

OP,

A) From the personal finance point of view, I expect the market to be highly volatile. And, that is a very good thing for someone like me with a 60/40 portfolio.

B) From me as a consumer point of view, it is "business as usual". I shopped base on value. I buy whatever delivers the right value with the price that I am willing to pay. I will substitute whatever items that are priced too high with a lowered cost alternative.

C) I had replaced my second car with an electric cargo bike. So, I am prepared for the price of gas to increase too.

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Re: A non-political discussion on tariff's impact

Post by Carguy85 »

I’d be interested in how much of the imports (for instance what percent of the $350billion in Chinese imports) are necessary for industry vs what is simply worthless crap that is bought off temu, Amazon, etc and bought in an instant with a click of a button after the thought pops into our heads which within a year is in landfills. Likewise, how much should interest rates stay elevated to prevent broke people from buying things they can’t afford? On the flip side, I like all bogleheads enjoy nice returns on our money and I realize that I profit at least to a certain extent off of others bad decisions regarding consumerism. Much of my day job matter of fact like much of the work in other areas of healthcare is based off of others bad decisions.
Last edited by Carguy85 on Sat Feb 01, 2025 12:21 pm, edited 2 times in total.
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Re: A non-political discussion on tariff's impact

Post by Wannaretireearly »

Eat cheap tacos while you can!
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Re: A non-political discussion on tariff's impact

Post by Dottie57 »

Gubshu wrote: Sat Feb 01, 2025 10:28 am I track my grocery expenditures carefully. When I shopped yesterday, prices on a number of items were significantly higher. Produce prices had risen quite a bit. I assume this was in anticipation of the tariffs. We eat a lot of fresh produce, and we are going to really feel the pinch.
Agree. Fruit especially will be mssed.
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Re: A non-political discussion on tariff's impact

Post by Lynx310650 »

Not being snide at all, I think you'll get better answers from ChatGPT than a discussion here.

FWIW I rushed a purchase on a car (Lexus NX) late last year because a good chunk of them are built in Canada. I wanted - and could have - spent a couple of months shopping around but I wanted to get it done before the new administration. I was almost equally worried about tariff driven price increases as I was potential supply chain disruptions (which would basically be the same thing I guess).

Something I've been focused on and trying to read up on is that there are some economists in the online universe arguing broad based tariffs would actually be deflationary in the aggregate, not inflationary. The argument seems to focus on the markets crashing (reverse wealth effect), along with Chinese tariffs being placed on mostly goods with elastic demand. So instead of paying extra for the goods, consumers decide to just not buy them altogether, esp in light of prices on more essential goods going up. So in the aggregate, this leads to a decline in economic activity, drop in asset prices, higher unemployment, and thus recession and deflation. It's an interesting theory I'm trying to read up more on.
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Re: A non-political discussion on tariff's impact

Post by Nver2Late »

Dottie57 wrote: Sat Feb 01, 2025 12:06 pm
Gubshu wrote: Sat Feb 01, 2025 10:28 am I track my grocery expenditures carefully. When I shopped yesterday, prices on a number of items were significantly higher. Produce prices had risen quite a bit. I assume this was in anticipation of the tariffs. We eat a lot of fresh produce, and we are going to really feel the pinch.
Agree. Fruit especially will be mssed.
DW and I were just having this discussion last night about the price of tomatoes. Since I eat most of them on my sandwiches, I told her to stop buying them at the new price point. I'm thinking about trying to grow cherry tomatoes in our hydroponic to replace. We'll see.

New to us this fall, we have joined a local hydroponic provider and get a variety of greens weekly to supplement what we grow at home. I hope their price remains steady.

The reality is that the consumer is in control if we are willing to not buy at the higher price points. Otherwise, inflation. Its our choice.
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Re: A non-political discussion on tariff's impact

Post by thermo86 »

stan1 wrote: Sat Feb 01, 2025 11:11 am To keep this properly focused on investing, how could we expect investors in ex US index mutual funds to be impacted? I think the guard rails are off on a lot of assumptions prudent investors have made since the Great Depression. I hope our mods are starting to realize that and will let us try to figure out what happens when very important assumptions we've all made might be changing and "stay the course" might not be the best advice for anyone under 80 (or those above 80 who plan to leave generational wealth). I don't know the answer, not sure if anyone does.
This is the Personal Consumer Issues forum.
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Re: A non-political discussion on tariff's impact

Post by yankees60 »

nisiprius wrote: Sat Feb 01, 2025 10:52 am In the past, my casual observation has been that when companies see that there is going to be a price increase in some key thing they use, they raise prices instantly--they don't wait for the effect to hit them directly, they raise their prices instantly in anticipation. A rise in the price of coffee results very quickly in a rise in the price of a cup of coffee at Dunkin', a rise in cacao is followed quickly by an increase in the price of a Hershey bar. A tariff is both a great excuse and a great signal for tacit collusion.
The owner of a company I once worked for told me that he practiced oil company pricing practices.

When there was a visible reason / excuse to raise prices ... he raised them immediately. For the opposite he'd lower them slowly.
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Re: A non-political discussion on tariff's impact

Post by thermo86 »

Lynx310650 wrote: Sat Feb 01, 2025 12:11 pm Not being snide at all, I think you'll get better answers from ChatGPT than a discussion here.
I value the opinions and behavioral patterns of Bogleheads.
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Re: A non-political discussion on tariff's impact

Post by ClevrChico »

thermo86 wrote: Sat Feb 01, 2025 10:01 am Other notable considerations?
If you're employed by or own a US business that exports goods, expect retaliatory tariffs. Plan for the potential impact to your income.
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Re: A non-political discussion on tariff's impact [Locked with explanation]

Post by Alex Frakt »

This is one of several threads on the topic of tariffs that have been locked or removed. I'm restoring this one because I want a place to explain our policies and because it's largely non-partisan even if it is off-topic.

The first forum policy that applies here is "discussions of proposed laws or regulations are prohibited." This applies to executive orders that have yet to take effect as well.

The reason for this is because it's basically a waste of everyone's time. Politicians constantly propose ideas that go nowhere. Even if the proposal gets as far as a bill being introduced, there is no assurance it will become law. Even if it does become law, it is the actual wording of the law that matters, and there are always important differences in that wording between the original proposal and the signed bill. Proposed regulations also go through a lengthy process that can result in considerable changes before becoming effective. Compared to laws and regulation, executive actions are relatively easy to make. But how, or even if, they end up being implemented is highly uncertain.

We also have a prohibition on general discussions of "US or world economic, political, tax, health care and climate policies". In fact general discussions of anything outside of investing news and investing theory is outside our scope. All other topics must be about your specific personal situation. Note that general economic theory is not investing theory. For example, discussions about the effects of tariffs on consumers (this thread) or trade or economic growth or governmental income are economics question, not investing questions. The only investing theory question I can see here is the historical effects of tariffs on the stock and bond markets. There are papers on this topic if anyone is interested in pursuing it.

The point of all this is simple utility. This is a non-commercial site with limited resources, most importantly the resource of moderator time, and I don't want to spend those resources on discussions that have little practical value to our participants or that fall outside our limited scope.
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