When Trump announced massive tariff increases on his so-called Liberation Day, there was instant feedback in the form of a big downturn in stocks.  It was likely this feedback from investors that gave us some relief after that.

The good news about the tariffs is that most Americans are already feeling the pinch (to put it mildly) of higher prices.  When you enact a policy that instantly causes 401k plans to drop by 10% or more, it tends to make those people against that policy.

If we get significantly higher prices down the road after enacting this policy (if that’s what you want to call it), then the average American who isn’t a diehard Trump supporter is probably going to blame the tariff policy.

Even though Trump tends to thrive on conflict, he is also somewhat of a populist.  If the majority of Americans are blaming his tariffs for their worsening economic situation, it is likely that Trump will have to reverse course.  He will probably do it in Trumpian fashion where he somehow declares victory even though it was just a stupid and unnecessary move.

When there were vaccine mandates in 2021 and 2022, it wasn’t clear if the people not willing to take the vaccines could win that battle because it was a minority of people.  There was a lot more concern there.

If you are against the higher tariffs and worry that they will worsen your standard of living, you have good reason.  But the good news is that you will have a majority of people on your side because most Americans are tired of paying continually higher prices.  Plus, those who have investments don’t like to see their net worth go down along with the higher cost of living.

The Chinese Call

While Trump put a pause on the much higher tariffs for most countries, the Chinese officials decided to call Trump’s bluff.  Sure, the Chinese are also temporarily hurting their own people by enacting their own import taxes, but they have likely just had enough of the bullying by the American government.

Whenever there is a problem in America, it has become fashionable to blame either Russia or China.

It’s interesting that Trump (and the Biden blob before him) insist on sanctioning Russia for the war in Ukraine.  This means that they won’t allow products to be sold to Russia.  In other words, it is like Russia putting a massive tariff on American goods.  Yet, Trump and company see this as a punishment for Russia.

If it is a punishment for Russia, why does Trump see it as a good thing to impose sanctions on his own country?

With the extraordinarily high tariffs on China, it is essentially like have sanctions at this point by both countries, with certain exceptions.

What About Shortages?

While there has been much focus on the stock market and what will happen with the tariffs, there hasn’t been a lot of discussion about the possibility of shortages, at least in the corporate media.

China is a major trading partner of the United States, or at least it was.  Trump keeps talking about making a deal now, but Chinese officials are playing hardball.  They are basically saying that Trump has to lower the tariffs before they will come to the table and talk.

In the meantime, this is an absolute nightmare for businesses, but especially businesses that rely on imports from China.  Trade has essentially been halted with over a billion people.

There is a decent chance that we could see major supply shortages.

Think about being a business that sells a product made in China.  Let’s say you sell book shelves that are made in China.  With the massive tariffs, you would have to more than double your price to consumers just to stay profitable.  It doesn’t make sense to import book shelves from China with these massive taxes.

Ok, you may say, but an American company can step in and make book shelves.  Well, first of all, it takes time to make this decision and actually implement the process.

But why would a company even start producing book shelves if they couldn’t compete before?  For all they know, Trump might make a deal with China next week and bring tariffs back to where they were three months ago.  Then the Chinese would ramp up production again and start shipping out book shelves.  All of a sudden, the American company that decided to start making book shelves is no longer profitable again with this product.

Think about this same example with thousands of products including toys, furniture, clothing, home décor, cleaning products, and healthcare equipment.  It is hard to imagine that there won’t be major disruptions at the very least.

Remember Toilet Paper

Remember 2020 when panic struck (because of the fearmongers in government and the establishment media).  Just as the lockdowns came, we also started to get shortages.  There were some shortages with meats and vegetables.  Of course, the big one that most people remember is toilet paper.

There was a run on toilet paper, and it still isn’t really clear why.  Once word got out that there was a shortage of toilet paper, it caused a vicious cycle of higher demand.  It was common to go to the store and see empty shelves where the toilet paper is sold.  If a new shipment came in, it was usually gone within hours, especially with word getting out on social media.

If we have major shortages in the near future, it is hard to say what it will be.  It would seem probable that it is something that previously came from China, but even with that we aren’t certain.  Some of the products listed above are common things imported from China, but we really don’t know where it will hit hardest.  The best you can do is prepare with extra things that you know you will need.

The Amazing Government Interference and the Amazing Marketplace

I have long said that it is amazing how much poorer we are because of government interference.  But it is also amazing how well the marketplace responds and is still able to thrive in spite of the interference.  We still somehow get advancing technology even with all of the taxes and regulations.

That is the good news and bad news here.

The tariffs are going to make us a lot poorer than we otherwise would have been.  And I say that with the opinion that we were already facing a recession with or without tariffs.  The higher prices are a real thing that make our lives harder.  If we have significant supply shortages, it will make life even harder.

The good news is that entrepreneurs are very resilient with all of the difficulties thrown at them.  If these tariffs last a while and we see supply shortages, the market will eventually respond.  At some price, businesses will provide what is in high demand, or at least provide possible substitutes.

Americans will mostly survive these higher tariffs, but it will make life more difficult that it needed to be.  In the meantime, it might not be a bad idea to take an extra trip to the store and stock up on some essential goods.

And if you were planning to buy something in the somewhat near future, you might want to consider getting it now before prices go higher.