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Tariffs, Stagflation and Stock Market Risks

What is so bad about a tariff? It raises money to pay for the recent tax cuts. It promises to raise prices for steel and aluminum manufacturers. Some laborers stand to benefit from higher wages and with less competition, more job security. At face value it sounds like a good idea!

Of course, it only works if the tariff takes place within a vacuum. The tariffs Trump promises this week are blanket, meaning they hit steel and aluminum from every nation. When such a draconian ax is taken to the playing field there will be a response.

Normally tariffs take a long process to change. Treaties and trade agreements go through a long process of negotiations before each member nation to the agreement presents the details to their legislative branch for approval. Passage isn’t guaranteed. Several safety nets are in place to encourage each nation to honor the terms of all trade agreements.

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