Tariff-ied?
When I send the agenda for our meeting to my clients in advance of our upcoming review of their investment portfolio and financial plan, I ask them in the e-mail if anything else is on their mind. I had a client who recently replied saying he wants to talk about the impact that tariffs could have on his planned spending. The retirement light at the end of his working tunnel is getting excitingly close: just about ten months out. At the turn of his next chapter, he plans to buy a new vehicle and camper to enjoy his full-time freedom. He cited a figure that he’d heard, of a potential 25% tariff on steel and foreign made vehicles. To that point, he asked “But maybe it makes sense to purchase them a year early with all the tariff talk?“
Ah, if only we had that crystal ball! Let’s consider some of the many factors that play into our decision making.
Let’s say that the tariffs are imposed. If his purchases were US made, or with parts already in our country, then the price increases may not be so out of the ordinary. However, if his merchandise were subject to tariffs, the producer, the importer and the currency markets will likely absorb some of the hit. We’ve seen the shift that supply chains can make and likely would again in reaction to a new tariff. Therefore, if there was an imposition of a 25% tariff, the impact to the end consumer would not be as great: likely it would be smaller percentage of that, maybe 5 – 10%. Then, there is also the supply-demand factor. If demand goes down, prices generally follow.
With the purchases, we’d be smart to factor in additional associated costs, such as the extra year of insurance, registration, storage and other maintenance, as well as an added year of depreciation and potentially foregoing the new bells and whistles that come with a year-newer product. Allocating the money to the new purchases rather than his investment portfolio would also miss out on a year of investment performance.
I’m glad he asked the question, because when it comes to that potential scenario, the tariff may not be so terrifying.
LouAnn Schulfer of Schulfer & Associates, LLC Wealth Management can be reached at (715) 343-9600 or louann.schulfer@lpl.com TheWealthInformationLady.com or SchulferAndAssociates.com
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
