04/22/2025
What is a tariff?
The International Trade Administration1 defines a tariff as “a tariff or duty (the words are used interchangeably) is a tax levied by governments on the value including freight.”
This tariff, or tax, is “paid to the U.S. Customs and Border Protection Service at the border by a U.S. broker representing a U.S. importer,” according to The Tax Policy Center. 2
Using a simple example, if 20 toasters are entering the United States and each is valued at $50, including freight, the total value of the toasters is $1,000. If a tariff is 20%, the U.S. broker will pay a $200 tariff (tax) to the U.S. Customs and Border Protection Service.
In our example, the cost is $1,200, including the newly levied tariff. Prior to the imposition of the tariff (assuming the toasters entered the U.S. duty-free), the buyer would have paid $1,000 to the importer.
So, ultimately, does the burden fall on the importer, the foreign manufacturer or the U.S. consumer? Or, will the tariff be shared?
***and these questions (unknowns) are weighing on the market this year
Market pullbacks aren’t unusual. They are to be expected.
Since 1980, the average intra-year pullback in the S&P 500 Index has been 14%, according to LPL Research. As of quarter end, the S&P 500 index had shed 10.1% from its peak.
A diversified portfolio cannot completely shelter you from market pullbacks, but it helps reduce volatility while tapping into the wealth-creating potential that stocks have offered over the long term.
What has worked? Historically, a disciplined approach helps strip the emotional component out of investing. Taking a diversified approach to allocating investments across a range of investment types typically helps contain overall volatility during difficult times.
What hasn’t worked? Timing the market. No one can consistently exit stocks near a high and re-enter near a low.
