What the New Tariffs Could Mean for Your Money

On April 2, 2025, President Trump announced a sweeping new tariff policy—one that quickly rattled the markets and is now raising real questions for investors.

Over two days, the S&P 500 dropped 10.5%, the Dow fell 9.3%, and the NASDAQ lost 11.4%—wiping out $6.6 trillion in market value.¹ While markets have since calmed a bit, this announcement marks a major shift in trade policy—and it’s likely not the last.

So, what happened, how does it work, and why does it matter for your long-term financial picture? Let’s break it down.

What’s New About These Tariffs?
This round of tariffs isn’t your typical “tit-for-tat” trade retaliation. Instead of setting tariffs to match what other countries charge, the U.S. is now calculating tariffs based on the trade deficit in goods—not including services. The formula is based on the size of the goods trade gap with each country and results in unexpectedly steep tariffs.²

Minimum tariff: 10% on almost all countries
High-impact examples:
- Vietnam: 46%
- Taiwan: 32%
- China: 34% (on top of existing tariffs)
- EU: 20%
- India, South Korea, Japan: 24–27%

Even countries that buy more from the U.S. than they sell—like Australia and Argentina—are still being hit with the 10% minimum.³

The Bigger Picture: What It Means for the Economy
These tariffs were designed to boost U.S. manufacturing, shrink the trade deficit, and possibly increase federal revenue. The administration estimates they could raise more than $6 trillion over 10 years⁴—enough, in theory, to help offset the cost of extending the 2017 tax cuts.

But tariffs also come with trade-offs.

Consumers and businesses may see higher prices, especially on goods that rely on imported materials.
U.S. companies could face retaliation from trading partners, which has already begun with China, Canada, and Mexico.⁵
Supply chains may slow down, particularly as tariff collection on lower-cost online goods ramps up.⁶

Studies from the last round of tariffs in 2018–19 suggest that U.S. companies ended up paying most of the cost and passed some—but not all—of that along to consumers.⁷

Why Markets Reacted So Sharply
Markets don't like surprises, and this was a big one. Investors had expected a more traditional, rules-based tariff approach. Instead, they got an aggressive and unconventional formula that raised fears about rising costs, reduced global trade, and slower economic growth.

Still, it’s worth noting that this drop came after two strong years for markets:

S&P 500 gained 24.23% in 2023 and 23.31% in 2024.⁸
The index hit an all-time high in February 2025—before this second wave of tariffs was announced.⁹

What Should Investors Do?
It’s natural to feel uneasy in times of market volatility, especially when headlines are loud and losses look big. But it’s important to zoom out:

Volatility is part of investing. Over the long run, markets have always recovered.
Pulling out now could mean missing gains later. Some of the best market days happen shortly after the worst ones.
This may be a buying opportunity—but only if it fits into your long-term strategy.
Markets are cyclical. Since 1928, the S&P 500 has had more up years than down, and bull markets tend to last longer than bears.¹⁰

What Happens Next?
Some of the new tariffs may be meant as negotiating tools. Early signs show that countries like Vietnam are already seeking compromises.¹¹ And with the policy still evolving, further updates and changes are likely.

In the meantime, staying focused on your personal financial goals—and not short-term headlines—is the most effective strategy.

Bottom Line
We’re in a time of rapid change when it comes to global trade and policy. But your financial future doesn’t have to be reactive. If you’re wondering how to make sense of all this for your portfolio or your plan, now is a good time to talk.

Sources:

¹–⁴, ⁸–⁹ Yahoo Finance, Morningstar, CNBC, S&P Global
⁵–⁷ CNN Business, AP News, U.S. International Trade Commission
¹⁰ Yardeni Research, Macrotrends, Investopedia ¹¹ The New York Times, April 6, 2025