What’s a tariff?
The global economy is made up of companies that sell goods and services to customers all around the world.
If a government wants to protect a local industry, raise extra money, or wield global influence, it may introduce an import tax. This is known as a tariff.
How do tariffs work?
Businesses that import their products from overseas suppliers get charged these tariffs, and have to pay them to their government.
This means their cost of business has increased. They have to figure out how to cover the extra expense, which they typically do either by looking for local suppliers to avoid the tax, absorbing the cost, or passing the cost onto their customers.
Either way, this increased cost has global impacts.
Why are tariffs in the news?
President Trump made a campaign promise to introduce or increase tariffs on foreign countries.
He went through with it on 2 April 2025, which he called Liberation Day.
He announced a 10% tariff rate for all imported goods to the US, which would take effect on 5 April 2025, as well as higher targeted tariffs for specific countries, which would take effect on 9 April 2025.
Why do tariffs cause international disputes?
The trouble is, countries don’t tend to take tariffs lying down.
Tariffs hurt individual businesses which ladder up to national economies.
Businesses might compensate for the extra cost by laying off staff, raising prices and the cost of living, or selling fewer goods which reduces the amount of tax their local government can collect.
Generally, this is why countries favour free trade agreements over tariffs. If countries can trade freely across borders, they’re more likely to experience economic growth and benefit from better living standards.
How have countries responded?
Countries and trading blocs take different approaches when faced with tariffs.
President Trump has argued his tariffs are a tool to negotiate more favourable deals for the United States.
While some countries are adopting a ‘wait and see’ approach, and others are still coming up with their responses, others have come out swinging.
On 4 April 2025, China responded to Liberation Day by announcing a 34% retaliatory tariff on some US imports.
Then Trump threatened China with an additional 50% tariff, to total 104%, if they went through with their threat.
China didn’t blink and announced an 84% tariff on US imports just before the market opened on 9 April 2025.
It’s a very live situation.
What does it mean for your portfolio?
Markets hate uncertainty and fear trade wars, with international stockmarkets experiencing swings.
This is because there are downstream impacts to tariffs which can include new trade alliances forming, impacts to inflation and unemployment rates.
What are people predicting?
Some people don’t think they’ll be so bad, while others think they’ll lead to recession. Some people think they’ll work as a negotiation tactic, while others think they’ll just make the situation worse.
How does it impact stock prices?
Investors try to price all these scenarios in, because they want to pay fair prices, or better, for shares of companies.
But because nobody knows what will happen next, and people are prone to panic, there’s extra selling at the moment, which drives down prices.
This is why you may be seeing big swings in your portfolio, no matter how you’ve invested it.
So what should you do?
At Spaceship we advocate for having a plan for your investing that takes into account your individual risk tolerance, investment horizon, and personal circumstances.
It can keep you from making emotional decisions you go on to regret, such as trying to buy the dip, or panic selling.
Consider seeking advice
It’s a good idea to seek personal financial advice from someone who knows your individual circumstances, such as an accountant or financial advisor, particularly if you’re feeling under pressure.
We’re here to help
In the meantime, you can check out the resources in our Market Uncertainty collection, and if you’re a Spaceship customer with a specific concern about your Spaceship investments, reach out to our customer support team.
