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Navigating Wealth Management Effects of Trump's Tariff War
Author: Joel Baretto, CFP®
May 6, 2025
Have we seen the worst of the Trump tariff effect on world markets? Or… Are we just getting started? In my 34 years as a wealth manager, I have never seen so many economists say “I don’t know” to questions about what is happening today and the future of the world economy.
The Trump tariffs had significant effects on wealth management, influencing various sectors and strategies. Wealth managers had to navigate increased volatility and uncertainty in global markets, impacting investment decisions and risk management strategies. These tariffs often led to higher costs for imported goods, affecting inflation and consumer spending patterns. Moreover, they influenced international trade dynamics, prompting adjustments in asset allocation and diversification strategies among wealth managers. Overall, the Trump tariffs underscored the interconnectedness of global economies and the importance of adaptive wealth management practices in navigating geopolitical shifts.
So, what does all this mean to your investment strategy? Let’s start with the facts…
First of all, financial markets do not take kindly to uncertainties. All we know is that Trump has always advocated for tariffs. Why? Even though the best economic experts in the world know that tariffs are an added tax on goods and services thereby inflating your cost of living, Trump seems to think otherwise. The problem is that it takes more than a stock market crash to make a narcissist back down on what he believes to be true. By then, it might be too late.
Way before Trump’s second term, there were a handful of economists sounding the alarm about an oncoming financial crisis akin to the great depression of 1929 which lasted more than a decade and ended during World War II in 1941. Today, there are way more than just a handful of economists who are deeply concerned about the trajectory of these tariffs and how far Trump will go to satisfy his ego at the expense of the world’s economy.
China produces about 30% of global industrial output, which is more than the US, Germany and Japan combined. In the aftermath of World War II, the United States economy evolved from one based on manufacturing to one based on customer service. Over the succeeding decades, manufacturing would continue to decline in the US, as the service sector became a crucial source of jobs and investment opportunities, contributing 76.4% of the US GDP in 2021.
As we evolve to a new phase of this rat race, I believe that the US should be more focused on moving forward toward technology and AI rather than backward toward manufacturing. Labor cost in the US is far more expensive than most emerging countries. The unemployment rate in the US is among the lowest rates in the world, tethering between 4.0% to 4.2% in 2025. Large manufacturing plants like auto and microchips use a lot of robotics. Exactly how is manufacturing going to bring back jobs and make America great again?
So, what does all this mean to your investment strategies, IRAs, and 401k plans? The conventional wisdom is to hang in there as the market corrects itself and pushes on to new heights over the long term. But with this new world order, is this still a sound strategy? Is the traditional 60/40 strategy still a good play? Should your portfolio continue to allocate more US securities versus China, Europe, Canda, and the rest of the world? Will the US dollar maintain its dominance?
When conventional wisdom stops being wise and common sense is no longer so common, it’s time to reassess your financial goals, risk tolerance, time horizon, asset allocation and investment strategies.
The bottom-line is that we may be witnessing a shift in global economic and geopolitical power. This was a long time coming but it took only one person to hasten the inevitable. The cards are in play and the stakes are high. If Trump pulls this off, he intends to use the gains from these tariffs to justify tax breaks. But the question is…If you are just taking from one pocket to move to the other pocket, was all this worth it?
Whoever emerges from this as the winner will probably rule the world. We may also be seeing the decoupling of the east and west. The traditional fundamentals may or may not work in these uncertain times — “I don’t know,” but I for one, will be in the sidelines watching out for opportunities that may arise from all this chaos.
Disclaimer:
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