📈 Tariffs Explained: Why Governments Use Them and How They Can Affect the Stock Market

The introduction of tariffs by President Trump aims to protect local industries and jobs by taxing imported goods, exemplified by a proposed 10% tariff on a $50,000 car, which would make domestic vehicles more competitive. Tariffs during his presidency affected $380 billion worth of goods, with further proposals including a 25% tariff on Canadian and Mexican imports. The motives behind tariffs include generating revenue and shielding local jobs, while also serving national security interests and responding to foreign trade practices, as seen in tariffs on Chinese goods related to alleged dumping. Retaliatory tariffs can escalate trade tensions, as demonstrated by China's response to U.S. tariffs. Although tariffs can encourage local purchasing, they often result in higher consumer prices, which can significantly impact sectors like retail and automotive. The debate continues over whether tariffs effectively protect jobs, with substantial costs highlighted by the 2018-2019 steel tariffs. The current tariff landscape affects various industries, causing increased operational costs and revenue setbacks, and leading experts to predict declines in stock prices within impacted sectors.