What Will Tariffs Mean for Me?

The sky is falling, the sky is falling! At least, that is the general sentiment in the news and on social media in the wake of the recently announced tariffs and revamped economic policy. The stock market has indeed been bleeding over the uncertainty surrounding these aggressive measures. What will all of this ultimately mean for the everyday American?

I’m certainly no economist (they seem to get it wrong more often than not anyway), but what I will do is outline where we are currently in a number of key areas that matter to you as a consumer and investor, where I think they might be trending, and what the impact might be.

Buckle up…this is only the beginning.

Stocks

The stock market is deeply in the red over the course of the last several weeks, but if you zoom out a bit, you’ll notice that the S&P 500 is now at early 2024 levels. This context is important, but it doesn’t offer any guidance or comfort for those watching their declining 401k and investment accounts.

I never try and predict where the market is going over the short term, and I am certainly not going to start now. What I will say is, prepare for the worst and hope for the best. A younger, long-term investor is in a completely different position than a retiree. For the younger investor, this may prove to be a buying opportunity. Just keep in mind that it could (and likely will) get worse before it gets better. Understand your risk tolerance and always maintain some working capital in the form of savings. If you are currently in or approaching retirement, you have likely already reduced your equity exposure. If your expenses are currently met through current income streams – such as Social Security, dividends, real estate cash flow, annuities, bonds etc. – there likely isn’t much that needs to be done and you don’t want to be selling equities into a declining market if you don’t have to. Depending on your portfolio combination and existing plan for a multi-decade retirement, you may simply rebalance or adjust allocations as needed. Speaking to a financial advisor may be beneficial.

Gas Prices

Gas prices, which are closely tied to oil prices, have been falling over the past year. Despite gas prices ticking up in the first few months of 2025, the price of crude oil is in rapid decline following the tariff announcement.

While imports of oil and gas appear to be exempted from tariffs, broader concern about an economic slowdown should keep oil prices suppressed over the next few months. Oil demand – and price — decreases as economic activity slows down. Prices at the pump tend to lag the price of oil, so it could take some time to see some relief.

Lower gas prices are a net positive for just about everyone: more disposable income for the consumer and lower input costs for small and large businesses.

If economic activity speeds up, however, or if the production (supply) of oil falls, prices will come back up. I don’t foresee this happening in the next few months.

Car Prices

The cost of a new car has been elevated for years, and people have been driving their current car for longer. With tariffs expected to hit foreign cars and parts imported to the U.S., the cost to repair older vehicles and purchase new ones will likely go up – a perfect storm. Even U.S.-made cars rely on parts from overseas. How much cost is ultimately passed on to the consumer by automakers and manufacturers is anybody’s guess, but if people stop buying cars, prices should fall…just don’t expect it to be anytime soon.

Buying a Home

The 30-year mortgage rate remains elevated and stands well above 6%, but with a continued drop in the yield on the 10-year U.S. Treasury, mortgage rates should continue to fall. Despite this good news, housing prices remain out of reach for tens of millions of Americans. According to Bankrate, as of January 2025, Americans need an annual household income of $116,986 to afford the median-priced home of $418,489, a 50% increase in the income required since January of 2020.

Construction costs will increase as the cost of imported materials rises due to tariffs. Despite Canadian lumber being exempt, the cost to build a new home could go up by several thousand dollars.

On the flip side, the inventory of homes for sale has been climbing and a continuation of this trend should help bring housing prices to a more sustainable level; however, barring a significant recession, it will likely take another year or two for housing to become financially accessible again.

Borrowing Costs

What is now clear is that this administration is aiming for lower borrowing costs. Not only would this help the U.S. government service its ballooning debt, but it makes it easier for individuals and businesses to borrow money. The question will be whether the yield on the 10-year U.S. Treasury (an important factor for what borrowers are charged) will continue its decline as investors dump risky assets in search for safety. If it does, and I fully expect that it will, this would be an energizing force for the economy.

Jobs

Prior to the tariff announcement and even before the start of the year, hiring was slowing. Companies continue to pump the brakes on hiring. The unemployment rate has slowly trended up, and despite the better than expected recent jobs report, the forecast remains gloomy.

Uncertainty around the direction of the economy and the unknown impact to businesses is never a good sign for those seeking a job. I do expect hiring to remain muted in the next several months as companies digest the new economic agenda. Even if tariffs lead to the onshoring of production and the economy eventually takes off, the benefits won’t be witnessed right away. While a 4.2% unemployment rate is historically low, all signs point toward a hesitancy to hire in corporate boardrooms. While businesses, which will benefit greatly from declining gas prices and decreased borrowing costs, they are still at the mercy of the strength of the consumer.

Final Thoughts

The expectation from many is that the cost of goods will rise over the coming months. I do, however, remain optimistic about the multi-year outlook. Only time will tell.

I plan to do a follow-up article in a year to evaluate the progress of this new economic paradigm and what it means for you. Until then, share your thoughts in the comments or on social media. You can find me at @BudgetBrainiac on X.