Unless you’ve been hiding under a rock for the past couple of days, I’m sure you know about the tariff strategy employed by our new administration. It’s obvious from many of my conversations with clients that most don’t fully understand what’s happening, or what the consequences will be.
The bigger question becomes what will entrepreneurs need to do in response.
For those who don’t understand what a tariff is, it’s a tax on foreign imports paid by the US Entity importing the goods. As an example, let’s say that your company imports machine parts from Germany at $10 a piece. Given the new 20% tariff on EU Goods, in order to get that part through customs, it will now cost $12.00.
This new system of tariffs increases prices by a minimum of 10% on almost all imported goods. That alone would be a major shock to any economic system. but that’s just the beginning. Many of our trading partners are getting hit with a tariff between 40% and 49%,
This means that almost everything you buy that’s imported, whether raw materials or finished goods, just went up in price somewhere between 10% to 49%.
Let me leave you with this…
The big question becomes what will this do to our overall economy? Estimates vary widely because it depends on what’s actually being imported and what country it’s coming from.
But the following are some conservative estimates…
1 – Somewhere between 15% – 16% of all the goods we consume are imported.
2 – The new system of tariffs will probably add somewhere between 2% to 2.5% to our overall Consumer Price Index or Rate of Inflation.
Since the last reported numbers for February 2025 put inflation at a 2.8% year over year increase, that means that once all of these tariffs have taken effect, inflation will probably increase to somewhere between 4.8% to 5.3%.
Inflationary pressures on our economy almost doubling overnight is a real shock to the system. This will affect every man, woman, and child in these United States.
No one will be immune.
It will take time for all of this to go into place. Tariffs have what economists have named a Ripple Effect.
It takes time for all of the raw materials and parts to become finished goods that end up at retailers who will then have no choice but to hike their prices in order to stay afloat. Many are expecting the full force and effect of this to take anywhere from 3 – 6 months.
Take a moment and consider the implications.
The last time I went grocery shopping, I almost went into shock. But a few months from now it will be much worse.
And will our incomes go up overnight to cover the tab? Of course not. Again…
No one will be immune.
This is the first in a series of articles I’ll be writing to help all of you get through the current crisis. We’ll talk about everything from what entrepreneurs need to do, to interest rates, and to what may happen in the overall economy as a result.
Again, this isn’t some political statement on what I believe to be right or wrong. Where you land on this issue will depend on your own personal political beliefs, but one thing is certain.
The rules of the game have changed and how we run our businesses will need to change in response. Till next time…
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
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