Fisher Investments Explains | What Are Tariffs?

Transcript

Tariffs are a tax that domestic buyers pay when importing goods or services from a foreign country. But whether tariffs are good or bad is still a topic of debate. To us, tariffs are bad for broad based economies, and historically they've proven to be worse for the country imposing them than the countries subject to them. But do tariffs spell disaster for stocks and the economy? Not necessarily. It depends on their size, their scope and whether the tariffs are fully implemented and sustained. Now, tariffs can generate uncertainty, which can make it harder for businesses and markets to plot a course forward. However, the fear of tariffs having this huge, widespread impact are often overstated. Now, here's why: First off, tariffs aren't always enforced to their full extent. Political or legal barriers, trade negotiations or logistical hurdles can limit their applications. On top of that, businesses are resourceful, and they often find creative ways to mitigate much of the impact of tariffs, whether that be through trade, rerouting, lobbying and negotiation tactics, or even redesigning or finding new sources for products to lower their overall duty costs. Now, what does this all mean for markets? While tariffs are always a net negative for markets, businesses have proven their ability to adapt, helping reduce their impact and making the actual outcome less severe than initially feared or hoped. So, when tariffs are broadly feared, it can increase the odds that reality turns out less disruptive than expected, which can result in a positive surprise for markets.