• We’ve been getting a lot of questions about tariffs since it is so front of mind with President Trump announcing reciprocal tariffs, along with the other tariffs he’d already talked about.
• What are they, how are they imposed, why do we have them, and who pays for them?
• First of all, there’s three reasons why countries impose a tariff.
• The first reason is to protect a domestic industry.
• For example, the Germans have a 25% tariff on American cars going into Germany, and that’s why Trump says you don’t see any Cadillacs when you’re in Germany.
• The Germans are protecting their domestic auto industry with tariffs.
• Another reason is to raise revenue, and it generates revenue for that country.
• The third reason is to either to use as a negotiating technique, or to punish or pressure another country.
• So, it could be used as a weapon and could devolve into a trade war.
• Tariffs work by imposing a payment similar to a tax collected by US customs at the border before something can be distributed out into the country.
• When an importer pays a tariff on an import, they then have to mark up the import to meet their margin.
• The retailer will also have to mark it up, and each step up the way there are markups that might not have been as significant without the tariff.
• Is that inflationary?
• The answer is maybe yes, maybe no.
• The consumer may say, I’m not going to buy the imported product when I can buy a great American option for less.
• In that case, to the consumer, their cost didn’t go up, so it is not inflationary at all.
• Or the consumer could decide to stop purchasing that product altogether, in which case it is disinflationary.
• So, this notion that tariffs are automatically inflationary is not correct.
• In President Trump’s first term, he had significant tariffs but we had the lowest inflation in decades in his first term.
• So, it’s not a foregone conclusion, and we think that’s why the market has not collapsed under the news of all this stuff.
• Another question we’ve been getting a lot is about reciprocal tariffs – what does that mean?
• Going back to the example of Germany’s tariff on American cars, it just means that we are going to do the same thing in reverse.
• Our view is that countries will most likely lower their tariffs.
• In our view, tariffs distort the market. We like free markets and competition! May the best product and service win.
• Be that as it may, we don’t see these tariffs becoming a huge inflationary thing, but they could.
• The inflation numbers were released this week, and they came in hot, but we see that as a temporary seasonal thing.
• We still think the Fed will be lowering interest rates later this year.
• Having said that, we believe it is very important to have our Invest and Protect Strategy because big bad bear markets come out of the blue.
• They happen suddenly and the market can collapse significantly.
• We hope it gives you peace of mind, as it does for our firm, that we have a strategy to protect against the downside to the extent that we can.
• Make sure that you like and subscribe to this video as well as share it with your friends! We want to help as many people become SCWPerS as we can.

Hello RPOA nation, and hello SCWPerS! I hope you guys are healthy, wealthy and wise as you receive this video, I want to wish all of you a very Happy Valentine’s Day. I’m in sunny Florida for a CEO convention, and so therefore the informal attire. In this week’s episode of the market alert video, we’re going to talk about tariffs, what they are, how they are imposed, who pays for them? Why do we have them? Because there’s a lot of questions now from from people, especially since it’s so front of mind with President Trump announcing reciprocal tariffs, along with the other tariffs that he had already talked about. So we’ll get we’ll dive into that and in some detail here for you. I would just want to say, you know, this is my 42nd Valentine’s Day with my wife. We’re celebrating our 40th wedding anniversary here in about a month and a half. And also we we were together two years before we got married. So 42 Valentine’s Days. And you know, the 40 years of marriage, as I always say, it’s the 20 happiest years of my life. I hope my wife doesn’t see this. So thank you for watching. And so let me go over with you what’s going on here with the tariffs. So first of all, there’s three reasons why countries impose a tariff. The one the first reason is to protect a domestic industry. So for example, you know, President Trump talks about how the Germans have a 25% tariff on American cars going into Germany, and that’s why he says you don’t see any Cadillacs when you’re in Germany. You only see Mercedes and BMWs and that kind of thing. So the Germans are protecting their domestic auto industry with tariffs. So that’s one reason why countries have tariffs. The other is to raise revenue. Straight up. They want to impose a tariff because they need money, and so they do that, and it generates revenue for that country. And so that’s one another reason. And then the third reason is to either to use as a negotiating technique, which, you know, we think President Trump has, has shown us that one pretty well. But also it could be because they want to punish, a country wants to punish or pressure another country. And so it could be used as a weapon and could devolve into a trade war. So I want to go over with you, you know how tariffs work, and talk about reciprocal tariffs and how they work, so to answer a lot of the questions that we’ve been getting about all that, so let’s say that we impose, the United States imposes a 25% tariff on French wine. So we have $100 bottle of wine that comes into the country from an importer. Okay? They bring it into the country, and they’re buying it from the French for $100 but there’s a tariff, the 25% tariff, so they have to pay a $25 and I’ll call it a tax. It’s like a tax, and it is collected by the customs, the US customs at the border, before that bottle of wine can be distributed out into the country. So when it comes into the country, the importer has to pay $25 on this $100 bottle of wine. So what do they do? They mark up, you know, they have to meet their margins. So they mark the bottle up, let’s say to $150 to get their $25 margin. So now what did they do? They now sell it to the retailer, right? And the retailer now gets it at $150 but before they put it on the shelf, they have to make money too. So what they do is they mark it up. Now, let’s say to $175 so this $100 bottle of wine that came into the country now is selling for $175. Now, without the tariff, it might have been, you know, $120 because, you know, each step of the way there are markups, but they wouldn’t be as significant. So question is, is that inflationary? Well, the answer is maybe yes, maybe no. If the bottle of wine now costs $175 the consumer may say, You know what, I’m not gonna buy French wine. There’s lots of great American wine that I can buy for $120 or less. So why would I buy this $175 bottle of French wine? And so they may just not even buy the wine. The French wine Buy American wine, and therefore, to the consumer, their cost didn’t go up. So it’s not inflationary at all. They may decide not to even buy it in the first place. I’m done with wine, you know, I’m gonna, I’m gonna stop drinking wine altogether. And if that happens, then they actually had a reduction in their cost. So therefore it’s disinflationary. So you know, this notion that tariffs are automatically inflationary is not correct. The other thing also is. And the way to look at it, whether it’s inflationary or not, is to say, is there a domestic alternative that the consumer can buy that is, you know, that doesn’t cause their cost to go up. And if that’s the case, then it’s not inflationary. So if it’s a consumer product or that is required to live on and to have as part of your consumption, then, yes, it would be inflationary. But, you know, we saw, you know, avocados and beer. You know, is that inflationary? Because they’re going to go up with tariffs with Mexico, well not necessarily, buy American avocados, buy American beer. No inflation there. Okay, so, and then also, we can look at President Trump’s first term, and he had significant tariffs back then, and when he did that, it did not we had the lowest inflation in decades in his first term. And so, you know, that’s evidence also that tariffs are not necessarily inflationary either. So it’s not a foregone conclusion, and we think that’s why the market has not collapsed under the news of all of this stuff. Now the other thing also is that, you know, he’s talking about President Trump is talking about reciprocal tariffs. Well, what does that mean? Well, basically what it means is, I’ll go back to Germany if you’re going to tax us at 25% for any American cars that go into Germany, then we’re going to do the same in reverse. Any German car coming into the US, we’re going to put the same 25% tariff on it. And so that way they’re they’re mirroring each other. And so our view is that most likely what will happen is that countries will lower their tariffs. And you know, I’m a free market person. I think there should be no tariffs at all. I think they distort the market, and they don’t, you know, I like free markets and competition, and may the best product and service win, and that’s what I believe in. And I think tariffs distort that. In fact, President Trump has said the same. So, in an ideal world we have no tariffs. Wouldn’t that be great, but be that as it may, we don’t see these tariffs that Trump is talking about becoming a huge inflationary thing, but they could. Now, the other thing also is that we got the inflation numbers this week, which kind of got lost in all this talk about tariffs, and they came in hot, we saw a higher inflation print than what we said in our Fearless Forecast, but we’re not overly concerned about it, because last year, in January, we also got a high inflation print. But it was, it was temporary. It was a, it was a, you know, seasonal thing, and inflation came down after that. And we think this will be the case this year as well, and we think the Fed will be lowering interest rates later on this year. We still stick to that one. And therefore we think we’ll have a good year in the stock market and in the bond market. And so from that perspective, we’re still bullish. Now, having said that, it is very important to have our sell strategy, our Invest and Protect Strategy, because, you know, big bad bears come out of the blue. We don’t they’re unexpected. They happen suddenly, and then the market can collapse significantly. And I hope it gives you peace of mind, as it does for me and for our firm, that we have this strategy to protect against the downside to the extent that we can. Now, you know, as I said, I’m at a CEO conference here in in Florida. And what’s interesting is, there are these massive firms. I mean, $300 billion firms, 150 you know, I’m surrounded by these people, and we’re like a little grain of sand on the beach by comparison to these people. And I don’t even know what I’m doing here, they invited little old me, you know, why did they do that? Why do they want me here? So I’m very flattered by being by the fact that they invited me to this, to this conference. But unanimously, these CEOs all think there’s going to be another big, bad bear, and that it is not a matter of if, it’s a matter of when. And the other thing they’re very concerned about is they think that there are many companies that do what we do. RIAs Registered Investment Advisors that are significantly over leveraged, even some very big ones. And they’re concerned that when this next bear market comes, this protracted, big, bad bear, that those companies could be put at significant financial distress. And so, you know, they’re actually talking about setting aside cash to cover for this kind of thing. Well, we believe that if you have a strategy to address it, you don’t need to set aside large amounts of cash that don’t make very much money over the long term to address that particular risk. So we have a strategy, and I hope it gives you peace of mind. I hope it enables you to sleep at night, as it does me and the rest of our investment oversight committee and our everybody here at RPOA. So for all you SCWPerS, I hope you’re out there SCWPering your little tails off that you’re enjoying your second childhood without parental supervision. And for all you clients, our job is to get you there as fast as you want us to and as fast as we can and hopefully get you to have fun and enjoy and do all the stuff that you want to do. You’ve earned it right, and we want to help help that happen for you. So make sure that you like and subscribe to this video that would be very helpful. Thank you. Share it with your friends as well as many people as we can help to become SCWPerS is truly our calling. It’s what we love to do. So thanks for watching this video. Hope it finds you healthy, wealthy and wise, and we’ll talk soon.

Please note: transcript has been modified after the time of recording. 

Economic indicators and stock market performance cannot be predicted. Opinions expressed regarding the economy and the stock market belong solely to Ken Moraif on behalf of Retirement Planners of America and may not accurately portray actual future performance of the economy or stock market outcomes. Opinions expressed in this video is intended to be for informational purposes only and is not intended to be used as investment advice for individuals who are not clients of Retirement Planners of America. All content provided is the opinion of Ken Moraif, CEO and Founder of RPOA Advisors, Inc. (d/b/a Retirement Planners of America ) (“Retirement Planners of America”, “RPOA”). ©Copyright 2023