May 20, 2019

Tariffs… Good or Bad?

american flag

Author: Marty Moore, CFP®

Date: May 20, 2019

Estimated Read Time: 3 minutes

 

While riding in the car the other day my radio was tuned to NPR.  The program topic was about the ongoing tariffs and trade dispute between the US and China.  Guests on the program were the governors from Nebraska (a Republican) and Pennsylvania (a Democrat).  Not surprisingly, each offered wildly different views on the subject: how it was impacting their state’s economy and how the people of their state agreed with, or disagreed with, the current policies of the Trump administration.  Despite the best efforts of the interviewer, she couldn’t keep the discussion from quickly turning into pure politics.  Such is the world we live in.

 

Here’s a few of my thoughts on the subject:

  • Tariffs are not a new invention – they have been used for years as a way (attempt) to level the trading playing field between two countries.
  • The U.S. has for many years had a trade deficit with China; we, the U.S., export (sell) far less goods and services to China than we import (buy) from them. (In 2018, this deficit was $378.6 billion!  The U.S exported $179.3 billion but we imported $557.9 billion.  Source: Office of the United States Trade Representative.)
  • Tariffs, in and of themselves, are not a good thing – they act as a tax on the consumer by increasing the costs of the goods upon which the tariff is being levied.
  • By increasing the cost of these goods, the economy can be affected negatively. As such, the potential for a weakening economy can cause investors to expect reduced corporate profits, thereby causing the stock market to go down.

An escalating tariff war, with each country trading jabs, is a lose-lose proposition.  Ultimately neither side benefits.  It’s reasonable to debate whether tariffs are the right tool to be used now to fix the huge trade imbalance that the U.S. has had with China for many years.  The intent, and hope, is that they will force the Chinese back to the negotiation table and to a new trade deal that, at a minimum, reduces the long running trade deficit with China.

For a quick (2 minutes) and thoughtful perspective on this issue, click the link to read Brian Wesbury’s recent commentary: https://www.ftportfolios.com/Blogs/EconBlog/2019/5/13/trade-war-hysterics

 

So… How did your taxes turn out for 2018?

The most sweeping tax legislation since the Tax Reform Act of 1986 went into effect for last year.  Many people benefited and saw a decrease in the amount of taxes they paid, but not everybody.

With the new law and the changes we have seen it’s important for us to assess how we might be managing your taxable accounts for maximum tax efficiency.  There may also be some tax planning opportunities that have opened up for you.

We would be happy to review your 2018 completed tax return and provide any feedback that might be helpful.  Either a hard copy mailed to us or an emailed copy is okay.

 

Financial Superpowers

Superior investing acumen?  Knowing how to outsmart a Vegas casino?  Ability to spot (early) the next Amazon?

Nope, none of these.

 

Click the link below to read Ben Carlson’s list of financial superpowers:

https://awealthofcommonsense.com/2019/05/financial-superpowers/

 

 

As always, thanks for reading.

 

Marty

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