How Tariffs Could Shake Up US Stocks (and Maybe Your Wallet)

Here we go again—tariffs are back in the spotlight, and they’re not just a political issue, they’re a stock market one too. The US has been considering tariffs on imports from China, Mexico, Canada, and the EU, and while nothing’s set in stone, these potential tariffs could seriously shake things up for investors.

Goldman Sachs Research warns that if tariffs hit hard, we could see S&P 500 earnings per share (EPS) drop by 2-3%. Yep, that’s a real impact. But how? Well, for every 5% increase in US tariffs, we’re looking at a 1-2% hit to S&P 500 earnings. And if those 25% tariffs on Mexican and Canadian imports go through, things could get even worse.

So, what does this mean for companies? If they absorb those higher costs, their profit margins could take a hit. If they pass the costs onto you, well, your wallet might feel the pinch. Either way, it’s a bit of a lose-lose.

And it’s not just about higher prices. Tariffs could send the value of the dollar skyrocketing, which isn’t great for companies that make money outside the US. When the dollar strengthens, their earnings can take a hit too.

Plus, don’t forget about the uncertainty factor. When tariffs are on the table, markets get jittery. And when uncertainty rises, stock prices tend to drop. In fact, a recent spike in US Economic Policy Uncertainty has already weighed on stock prices by about 3%.

So, where does this leave us? If tariffs are implemented and stay in place, we could see a 5% drop in the S&P 500. But, if it’s more of a temporary thing, the damage might not be as bad. Either way, it’s a bumpy ride ahead. Keep your seatbelt on, folks!