The Truth Behind Trump Tariffs and Debt Management
Welcome, everyone. Today’s blog and accompanying YouTube video were done the day after Thanksgiving, so I hope you had a great Thanksgiving dinner, whether it was with friends, family, or alone with your loved ones. I don’t know how you avoided politics, but we’re going to get a little political now with the Trump Tariffs and President Trump prepares for a second term.
Here’s my disclaimer: I don’t care if you’re a Trump supporter and 100% MAGA. What I’m going to talk about is pure reality. You can believe what you want—that’s your option at the end of the day, but today’s topic is Trump tariffs.
Misinformation is plenty about the Trump tariffs, suggesting they’re good for the consumer. The reality is very simple: when something costs more for a company, they don’t swallow that cost—they pass it on to you.
How the Trump Tariffs Work
If something costs $100 and now costs $125, Home Depot, Lowe’s, Walmart—any company you pick—they will not swallow those $25. They will pass it on to you because that’s how business works. We’ve all done the same thing. Even as a business owner, if my costs increase, I don’t swallow those costs. Many times throughout my career, when court costs went up in divorce or bankruptcy cases, I didn’t swallow those costs—the client had to pay more. This situation is no different.
Based on what he has said, Trump’s tariffs range from 25%, 100%, and 1000% to 3000%. The Trump tariff is nothing more than a tax on you. If a product increases $25, you just lost $25. The idea that a company will lose $25 on every product is absurd unless the goal is to drive those companies into bankruptcy. So, these tariffs should be a concern.
Let’s go back to John Deere for a moment. President Trump even said he would impose a 1,000% tariff on John Deere for moving their factories to Mexico. That never happened and was never discussed. John Deere had no intent of doing that. This shows President Trump’s attitude of singling out certain companies for no reason at all, even if it’s not true.
You might wonder if the Trump Tariffs might work, and the answer is that trade wars don’t work. They have never worked and never will.
Although I think the Trump Tax is more descriptive, the theory behind the Trump Tariff is that there is so much fentanyl coming in from Mexico that the tariff will somehow prevent that. There’s talk about fentanyl coming in from Canada, but I don’t know how much fentanyl actually comes from there. Canada isn’t typically known for the drug trade, but let’s assume that’s true.
Update: The fentanyl coming from across the Canadian border equals .2% or 43 lbs. This is besides the fact that if it crosses the U.S. border, it’s getting past U.S. Customs and Border Patrol. So while it’s easy to blame Canada, apparently, the U.S. isn’t doing its job.
The reality is, if drugs are coming through and we’re now issuing a 25% tax on consumers, we’re ultimately paying the price for that, which doesn’t make much sense. I think all countries involved have a vested interest in stopping the drug trade. Even if drugs are being pushed out of one country into another, it doesn’t eliminate the problem—they still have drugs in their own country to deal with.
Regarding the fentanyl crisis, some studies justify devoting more money to education and therapy, which has reduced the amount of fentanyl being consumed. The trajectory has been moving downward this year for the first time in a long time.
Now, let’s go back to these tariffs. In the trade war with China, we consume almost everything China produces. We don’t make much ourselves these days. If you look this up, you’ll see we’ve already been through this. From 2016 to 2020, when Trump was president, he issued tariffs on China and Mexico. What happened? They retaliated.
The First Trade War
Bankruptcies for farmers reached an all-time high, and they got bailed out with approximately $15 billion. It sounds like socialism or entitlements, but just because you change the wording doesn’t change the reality.
In 2016, Mexico bought cheese from us, from our farmers who also produce soybeans that are sold to China. Due to the tariffs, there was no buying, selling, or transporting. Many farmers were bailed out to avoid bankruptcy, and that came out of our pockets. Issuing a tax across the board means the other country will retaliate against us. It’s that simple.
There are theories that this will lead to the domestic production of goods we buy from China. Good luck with that.
First, it’s been proven repeatedly that producing goods in the U.S. at lower prices isn’t going to happen. Anybody can research this. The products fabricated in China and shipped here won’t be made quicker, faster, or cheaper just because they’re produced here.
The bottom line is that their wage system is different from ours. So, whatever costs $1 to make over there will cost $10 here. Guess who pays for that difference? You do. It’s always been that way. That is a tariff in reverse, but you are paying for it one way or another.
Be Prepared. Analyze Your Situation
There are a couple of things I want to go over. My main goal for today’s video is debt management. There are other experts out there when it comes to wealth management. I’ve always thought that if you have debt, you can’t worry about wealth because you need to get rid of the debt first before figuring out how to build wealth. That’s why I do what I do with these videos, my blog, and everything else. To teach about debt as much as possible.
But here’s the thing: we don’t know what will happen. President Trump has said he’s going to impose tariffs. Will he do it? I don’t know. It could go up to 100%, maybe 0%, and nothing gets done. But the question is- is this the time to get into more debt?
Thinking conservatively, how will that affect you if we go with the 25% rule that President Trump mentioned a few days ago? Studies show this could have the effect of a $4,000 cost to the average household per year. That’s a little over $300 a month. Do you have an extra $300 a month? If you do, send it to me—I’ll take your money! But seriously, if this is true, it will cost you $4,000 more per year, and you haven’t done anything different. If you can’t earn $4,000 more yearly, you’ll get $4,000 into debt.
Suppose everything goes well, and somehow, all this magically disappears after two years. You are still $8,000 more in debt. This isn’t going to help your situation. Even if the price of gas, eggs, bacon, and washing machines goes down, how fast will it go down to make it worth your while to pay down that $8,000? If a $100 washer that went up to $125 is now $75, you’re not getting those $25 back. Even if groceries cost $100 less monthly, you’re still short $200 monthly.
So why am I telling you this? Part of debt management is being prepared, just like wealth management. You look at stocks and trends and try to figure out what will happen based on all the information you have. The same applies in reverse when it comes to debt. You should consider twice, especially based on President Trump’s words.
A 25% tariff will cost you more for all these products. If that’s the case, can you withstand the storm? Is now the time to get into more debt? Only you know that based on your financial situation.
The Economy is Already Better Because of Trump Tariff Threats?
Perception is reality, which is another danger. New studies show that MAGA supporters are confident the economy is doing great. They’re piggybacking on the idea that the economy is getting better because of President Trump, yet he’s not in office. When a president takes office, things don’t change overnight. It takes time.
For example, the current administration inherited inflation from the Trump administration, and COVID-19, of course, played a role. But Biden or any other president can’t fix all the problems in one day. In this case, it took a couple of years to get out of inflation.
So, while Trump supporters might think the economy is doing great, that doesn’t mean it actually is if we get hit with a 25% tariff or more. What will that do to your pocket? Before you jump into more debt, think about the situation. If this tariff comes in, you could end up with another $2,000 to $4,000 in debt, plus whatever moves you made that caused you to get into more debt before this, like refinancing your mortgage or remodeling.
Wealth management is directly tied to debt management, which means being careful about what you’re doing three to six months down the road. Don’t guide yourself by your feelings. Look around you. Did you just get a raise? Are employees being laid off at work? Did you reduce your expenses to ride out the tariff wave?
In reality, I hope there is no tariff. I hope the economy explodes. But we have to be careful with all the signs. Taking President Trump at his word means that maybe now is the time to hold back and figure out what we will do next. I’ll give you an example.
We were thinking of selling our home and relocating out of state. Now we’re thinking, wait a minute. Chances are, and I could be wrong, but the real estate market will go up again, then down.
This could happen with lower interest rates and deregulation of the mortgage industry, which causes an increase in home values. That’s awesome if you’re going to sell your house, but if you are buying another home, you are now losing money. Here’s why:
Let’s say that your house purchase was originally $100,000, but in a crazy real estate market, it jumps up suddenly to $150,000. You’re paying taxes and insurance based on $150,000. So what you gain on one side, you lose on the other.
One more thing I want to talk about is Global inflation. The theory, and, you know, we lawyers always have to parse words. When people say he was running fast, lawyers always ask how fast. Compared to who? To the fastest man in the world or compared to the average “Joe.”
So, in relation to the Trump Tax, you might read that global inflation is going to go down with the Trump tariffs, and you get all excited and say, “See, I knew this was a brilliant idea.” Well, it would be global inflation minus you.
Let’s return to the law of supply and demand we learned in grade school. If we do not buy China’s products, what will happen to those products? They have inventory that they need to dump. So supply is increased. So what do they do? They negotiate with whatever countries and say we used to sell this for $1 to the United States, but we can sell it to you for $0.75.
So, that lowers inflation for those countries. So globally, it might be great, but not great for us. This is based on common sense. You don’t have to be an economist, although you can read all the endless articles that are out there from credible sources confirming what I’m telling you. But if something costs $25.00 more to make. Then that is going to get passed on to you. That simple.
When concrete costs more, does housing get cheaper? When it costs more money to make a car, whether because of taxes or any other reason, such as the steel is getting harder to get and the supply is down, increasing steel costs, the car sale value does not go down.
So the whole point of today is to think twice about what you’re going to do because if these tariffs are issued, and by the way, the President pretty much has the authority, Congress’s powers are somewhat limited, so this makes it even easier for President Trump to do so.
Again, we have seen this already; let history serve as an example. Research how many farmers went bankrupt and the $15 billion that went into a farming aid package because of the trade war with China, which increased the price of soybeans and cheese for Mexico.
Those who forget their history are condemned to repeat it. So don’t listen to the political hype. Think common sense. When things cost more, it costs you more. It’s that simple.
If you have any questions or comments, feel free to post them in the comment section of the YouTube video. I’m seeing new subscribers daily, so thank you. I do appreciate that.
I hope everybody had a great Thanksgiving. I hope next year, on Thanksgiving, I’m talking about something other than the tariffs. Take care, everyone.
Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. For paralegals and students buying single copies, you can do so via Amazon Books. To access my YouTube channel, click this link.
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This transcript was edited for clarity.
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