America’s Trade War is Heating Up… What Older Adults Need to Know Before it’s Too Late!
Tariffs have been in the news a lot lately. First, the U.S. shocked its allies, Canada, the EU and Mexico, by announcing a 25% tariff on steel and 10% on aluminum. Then, just last week, President Trump said that he wants to put tariffs on $50-billion worth of Chinese goods.
In the case of steel and aluminum, the Trump administration justified their decision to impose tariffs based on national security issues. The tariffs that they launched against China were, among other things, intended to punish the country for intellectual property violations.
In this article, we’re not going to get into the debate regarding whether tariffs are “fair”… or even whether they are effective. We’re also not going to take a partisan perspective. Besides, since the Republican Party was traditionally free-trade focused, it’s hard to know what a partisan perspective would be in this case!
Instead, we want to focus on some of the confusion that surrounds tariffs, generally speaking. Then, we want to help you to understand how they might impact older adults. We hope that this article helps you to prepare as the world, potentially, enters an unprecedented trade war.
What Are Tariffs Really?
Tariffs are taxes, plain and simple. When a country places a tariff on another country’s goods, they are effectively placing an additional tax on *their own citizens.* The goal of a tariff (tax) is to make a foreign country’s products less appealing, thus “encouraging” domestic consumers to buy local products.
The important point to note there is who pays the tax – it is the consumer, not the producer. So, when the U.S. places a tariff on a Chinese dishwasher, the American consumer pays the tariff, not the Chinese producer.
Of course, the business-savvy among you may point out that it’s a bit more complicated. Chinese producers may choose to lower their prices slightly to compensate for the increased tax. But, ultimately, the consumer will almost always end up paying more anyway.
What Are the Most Likely Impacts of These Tariffs for Older Adults?
The first – and most obvious – impact of these tariffs is that many of the things that you purchase may be about to get more expensive. For example, if you are in the market to buy a printer from China, you may see the price go up. Or, if you choose an American-made equivalent (assuming you can find one!) you will likely have to pay a premium.
Many of the products hit by the $50-billion tariffs that Trump announced were industrial or commercial products. As a result, you may not see an impact from them immediately. However, since many of these products are used to make other consumer products, the longer this trade-war continues, the more likely it is to impact you directly.
For example, many of the products that were hit by the recent tariffs were in the medical industry (lasers, X-rays and pacemakers). This means that, eventually, Americans may see an increase in their medical costs. This is especially important for older adults, who have seen their healthcare costs rise dramatically over the last decade.
Second, if China retaliates (as it has promised to do) and the U.S. imposes additional tariffs (as President Trump has promised to do) the scale of the tariffs on both sides could reach the point that inflation, overall, starts to increase.
For older adults on fixed incomes – and there are many of us – this means that our money may not go as far as it used to.
In addition, rising inflation may cause the Federal Reserve to increase interest rates, which could make it more expensive for us to borrow.
How Can Older Adults Prepare for the Coming Trade War?
First and foremost, everyone reading this article should take the time to think about the potential results – negative and positive – of imposing tariffs. After all, if you support them, you are basically voting for a tax on yourself. There is nothing necessarily wrong with this. As a society, we choose to pay taxes for all kinds of things. But, let’s be clear about what a tariff is so that we can have an informed debate.
So far, a majority (52% of Americans) support placing tariffs on Chinese goods. So, politicians will likely continue to support – or at least not actively oppose – the actions that the Trump administration has taken against China and other countries. As always, whether you support or oppose this decision, make sure that your voice is heard. Older adults are a powerful political force.
Second, talk with your financial advisor or accountant about what a rise in inflation might mean for you. For example, should you consider investment options that adjust to inflation, such as TIPs (Treasury Inflation-Protected Securities)?
Also, if the Federal Reserve does increase interest rates, make sure that you don’t get stuck in a low-interest-rate account. Talk with a professional about how to take advantage of higher interest rates when and if they come.
Finally, as Canada, Mexico, the EU and China retaliate against these tariffs, it is likely that many American companies will be impacted as demand for their products decreases abroad. If this happens, they may be more likely to let employees go to save costs. This is just one more reason that I am strongly in favor of older adults developing alternative and diverse sources of income in retirement.
If you are looking for ideas on how to make money in the years leading up to and during retirement, I encourage you to read the following articles on Sixty and Me.
Home-Based Business Ideas for Women Over 60. Read the article.
“People Over 50 Are Too Old to Start a Business” – An Angry Debate with an Old Friend. Read the article.
How to Start a Consulting Business After 50: 6 Tips You Need to Know. Read the article.
60 Ways to Make Money in Retirement. Read the article.
I hope that you found the information in this article useful. Once again, our intention is not to argue for or against these tariffs. We simply want to cut through some of the noise so that you can better prepare for their potential consequences.
Do you support tariffs on China, Canada, the EU and Mexico? Why or why not? Did you know that it is you, the consumer, that pays any tariffs that are placed on foreign goods? Let’s have a conversation!