New tariffs are coming all across the board. On Wednesday, President Donald Trump announced tariffs of 10% that will apply to all countries — the only exception is for goods that are compliant with the United States-Mexico-Canada Agreement (USMCA) trade agreement. Some countries will be hit harder than others, however, as Trump looks to level the playing field by imposing reciprocal tariffs.
Here’s what investors need to know.
1. “Worst offenders” list has some countries facing significantly higher tariffs
A blanket 10% tariff isn’t all that Trump imposed. Goods imported from countries that Trump says have been imposing high tariffs will also face high tariffs as they enter the U.S.
There are 60 countries on this list, including China, which will be among the hardest hit. The tariff rate on its imports will be 34%. That’s in addition to existing tariffs of 20% that are already in place, putting the total at 54%. Cambodia is another country that will be hit with a high rate of tariffs at 49%, while Vietnam is not far behind that at 46%. Imports from the European Union will face a tariff rate of 20%.
Canada and Mexico weren’t on the “worst offenders” list, but their goods that are non-USMCA-compliant will still be subject to 25% tariffs. What stands out is that there will no longer be a pause on tariffs for foreign-made automobiles.
2. Tariffs will come into effect this month
It won’t take long for consumers to feel the effects of the tariffs. Tariffs on foreign-made automobiles will come into effect Thursday at midnight. The sweeping 10% rate will come into effect on April 5, and a few days after that, April 9, is the date set for the rates that will apply to goods from countries facing higher, customized tariffs.
This doesn’t give businesses a lot of time to react. And some big retailers, cognizant of high inflation, are already looking for ways to try to minimize the effect on consumers. Walmart, Target, and Costco have reportedly been reaching out to suppliers in China in hopes that they can absorb some of the impact of the tariffs.
Failing that, retailers will either have to risk stretching consumer budgets even further by raising prices or put pressure on their already tight profit margins, which are typically in the single digits; there isn’t much room for them to take on significant cost increases without taking a big hit to their bottom lines.
3. De minimis exemption is closed
One of the more controversial issues involving goods purchased from Asia has involved low-cost items that have been able to avoid tariffs as a result of the de minimis exemption, which covers items costing less than $800. However, as of May 2, a 54% tariff rate will also affect these low-priced items, which will include goods that consumers purchase from Shein and Temu (which PDD Holdings owns).
For consumers, that could drastically increase the cost of their purchases, as these companies may need to raise their prices. Shein has previously alleged that rival Temu incurs a loss on every sale it makes. The big winner as a result of this may be Amazon, which launched a discount store called “Amazon Haul” last year, offering low-priced items in an effort to better compete against these companies.
Why investors shouldn’t panic
Tariffs will raise prices. They can hurt margins for many businesses, but they may not necessarily be in effect forever. Trump is a dealmaker at heart, and while he’s come out of the gate swinging with tariffs, he isn’t trying to hurt American businesses. Tariffs may come down, and they may be temporary. Businesses such as Walmart or Costco may feel the effects in the short term, but they can and will adapt; it’s just a question of how well they’ll be able to do so.
If anything, I see this as an opportunity to buy stocks in the event of a possible panic in the markets. If you’re a long-term investor, then there’s little need to worry. Simply focus on quality businesses with good margins, which may be in good positions to weather the storm. And be sure to channel your inner Warren Buffett, and remember to “be greedy when others are fearful.”
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy.
