Jill On Money: Trump tariffs — More than a little disturbance

Tariffs are about making America rich again and making America great again They ll be a little disturbance we re OK with that it won t be much President Donald Trump in his March speech before a joint session of Congress By now you know that Trump s April reciprocal tariffs were much steeper than expected How steep According to analysis by the Budget Lab at Yale University along with previously informed tariffs the average effective U S tariff rate is now percent the highest since It is not hyperbole to say that the Trump tariffs could upend decades of globalization and disrupt world commerce in a meaningful and seemingly not a good way Investors reacted to tariffs by selling stocks In the two trading sessions after the announcement trillion of value was wiped out far worse than a little disturbance Jill Schlesinger Investors are worried that when all of the U S and retaliatory tariffs go into effect and wind through the financial market they will product in higher prices and slower expansion a precarious economic outcome that is called stagflation stag as in stagnating progress and flation as in rising prices or inflation EY Chief Economist Gregory Daco estimates that if these tariffs remain in place the increased cost of imports could add a full percentage point to the inflation rate by the end of the year which would push the Consumer Price Index above For the median household this would represent an annual income loss of while for families in the bottom quintile the loss would surpass The center-right Tax Foundation believes the damage will be even worse projecting that tariffs will reduce after-tax income by an average of and amount to an average tax increase of more than per U S household in To be clear a tariff is not an actual tax on consumers rather it acts like one because it causes prices to rise and therefore reduces disposable income and consumer spending As consumers are confronted with higher prices for fresh produce apparel furniture and toys not to mention big ticket items like new and used cars car parts auto insurance and appliances they may pull back their spending on other areas of the market That s why the Budget Lab projects that annual economic progress will slow to a crawl likely below one percent That s not a contraction but given the volatile nature of the situation along with jittery financial markets JP Morgan Chase CEO Jamie Dimon warned in his annual shareholder letter that the current tariffs will likely increase inflation and are causing several to consider a greater probability of a recession Before you cash out of everything and run for the hills remember that tariffs have been on-again off-again and now on-again If tariffs are indeed temporary then the economic and sector impact may not be as severe But if we are headed for a recession know that we have been there before According to the National Bureau of Economic Research the organization that is responsible for declaring the beginning and end of recessions there have been nine recessions since They are not pleasant but if you are worried try to tune out the noise and control what you can control That may mean conserving cash to ensure that you have - months of living expenses socked away especially if you are worried about losing your job paying down outstanding high interest debt and maybe delaying any big spending that you were planning to do until you have a better idea of whether an economic slowdown will impact you Jill Schlesinger CFP is a CBS News business analyst A former options trader and CIO of an resources advisory firm she welcomes comments and questions at askjill jillonmoney com Check her website at www jillonmoney com