Trump Says a ‘Disturbance’ Is Coming: 5 Things That Could Mean for Your Wallet
Written by
G. Brian Davis
Edited by
Jenna Klaverweiden
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In an interview with Fox News, President Donald Trump agreed that American consumers may face some turbulence in the wake of his economic agenda. “There is a period of transition because what we’re doing is very big,” he said in the interview.
The interviewer asked him about the stock market and economic performance in the wake of tariffs, citing what he told Congress in a speech: “There will be a little disturbance, but we’re OK with that,” he said.
The turmoil surrounding the administration’s tariff policies and trade war talk have already rattled markets. The Motley Fool reported that the S&P 500 fell into a correction on March 13, defined as a fall of 10% to 20% from recent highs.
So what should you brace for as a consumer to prepare for a possible disturbance?
Also see how tariffs could impact the housing market.
Inflation
Companies that import goods don’t just eat the cost when governments slap tariffs on their imports. They typically pass those costs on to consumers in the form of higher prices.
“Many big-budget items like cars and home renovation supplies will be hit with tariffs, resulting in instantly higher prices,” said Melanie Musson, personal finance expert with Clearsurance.
She added that many smaller items may hit Americans’ budgets even harder because we buy them more often. “Smaller items that aren’t on your radar will also get more expensive, such as insulated coffee mugs, produce and electronics,” she said.
As prices rise, the purchasing power of each dollar shrinks, and suddenly your nest egg isn’t worth as much anymore. It’s why people call inflation “the silent killer” of savings.
Shipping Delays
Trade wars don’t just cause prices to spike. They also disrupt supply chains and shipments, according to Gates Little of The Southern Bank Company.
“Surges in ordering before tariff hikes take effect can lead to traffic congestion, which slows delivery speed. As businesses update their sourcing, there can also be shortages in raw materials, delaying production times,” he said.
Some Goods Becoming Unavailable
Some companies may stop importing certain items altogether if they become too expensive to realistically sell in the U.S.
“Businesses pass that additional cost on to the consumer, leading to higher prices,” Little said. “Some may choose to discontinue affected products altogether, especially if they are unable to source the goods domestically.”
For example, the Trump administration has threatened 200% tariffs on European wines, per the Associated Press. But is there a market for paying $100 a bottle for Bordeaux that costs $30 everywhere else in the world?
Maybe not enough of a market to justify the hassle and cost of importing them.
Recession Risk
According to a March CNBC Fed Survey, fund managers and analysts saw a leap in recession risk. Financial experts now see a 36% chance of a recession over the next year, up from 23% in January.
They aren’t the only ones, either. Deutsche Bank now forecasts a roughly 50% chance of recession this year, Business Insider reported.
Recessions can lead to shuttering businesses, job losses and soaring unemployment rates, all of which could affect Americans’ wallets.
Tighter Credit Markets
Borrowing money could also become more difficult and expensive. After all, lenders price their loans based on risk — and today’s higher chances of a recession create far more risk.
“This added risk might cause changes in interest rates and employment patterns as well,” said Sara Levy-Lambert, real estate expert with RedAwning.
Nor is recession risk the only reason banks may pull in their purse strings. “A reconfiguration of trade or financial regulations could lead banks to tighten their lending standards, changing the financing environment for both homebuyers and small business owners,” she said.
The landscape has started shifting quickly. It remains unclear how the land will lay when it’s all said and done, but it’s safe to say that a “disturbance” may be happening. When in doubt, tighten your spending, keep a deeper cash reserve and reconnect with dormant contacts in your industry. A stronger network and net worth will both serve you well in times of uncertainty.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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