Why a Trade War Will Hit You Between the Eyes

Why a Trade War Will Hit You Between the Eyes  

President Trump’s strategy has always been to keep people guessing, off-balance and feeling uneasy. He’s written about it in his books and he’s been doing it so far in the White House.

The most recent controversy is coming from potential trade wars, seemingly with everybody. Just a few days ago, he attacked Canada accusing them of unfair trade over lumber and imposed a 20% import duty on Canadian lumber. This caught everyone by surprise, including the Canadians.

Never mind that Canada is our closest friend in every aspect, this bold move will add about $3,000 – $5,000 a year to the cost of new homes sold this year alone. This is very short-sighted as it will favor a small number of producers at the cost of millions of consumers.

The day before that he attacked NAFTA, which allows for the free movement of goods between the U.S., Mexico and Canada. At first, he said he would withdraw from the deal, then he changed course and said he would renegotiate it. This action would halt the import of semi-finished goods from Canada and Mexico which are indispensable to American industry. American car buyers would be hurt the most as prices would soar, especially in the face of foreign car manufacturers who will have no such restrictions.

This is a risky game, as trade wars will hurt the U.S. economy, the stock market and your retirement portfolio. It’s also dangerous in the fact that China is waiting in the wings to swoop down and befriend our estranged relationships.

What is most likely occurring is an effort by the Administration to move business and money out of the blue (Liberal) states and into red Trump-supporting states. Ironically, that’s where most lumber mills reside. What a surprise!

Protectionism hurts everyone. When a country takes action to protect an industry, usually a dying one, the costs to consumers are enormous. Obama imposed punitive duties on cheap Chinese tires in 2009. The move saved about 1,200 jobs but forced U.S. tire prices to increase more than 10%. That works out to about $900,000 per job saved.

Investor Strategy

I bring this up so you are aware of what moves markets and ultimately your portfolio. Retirement investors can no longer take a gunslinger attitude towards investing. You can pray for peace but you must also prepare for war, so build your retirement master plan and stick to it!

At this point in your life, you know you cannot replace this money unless you want to work until you die! Be the expert or work with a Retirement Advisor that can help you stay on track.

Now is the time to review, not only your portfolio, but your overall master plan. Things have changed and it’s time to Trump up your portfolio!

As always, feel free to contact me with any comments or questions.

Cheers -Keith
916-925-8900

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