You’ve probably heard the news. 

Last week, President Trump signed off on two new tariffs of 25% and 10% on imported steel and aluminum, respectively.

The Commerce Secretary Wilbur Ross has been trying to sell these tariffs as “no big deal” to the U.S. public.

Mr. Ross recently appeared on TV holding a can of Campbell’s Soup (watch the video here). He says the new U.S. tariffs on steel and aluminum would only add less than a penny to the cost of the soup.

Is this true? The answer is probably a little more complicated than that.

The ABCs behind Tariffs

We get it. Tariffs don’t sound all that interesting. But here’s why you should care.

Tariffs are a charge on imports, or essentially a tax.

Here’s how this could play out: If a ton of steel costs $100, the 25% tariff means the seller now must pay $25 to the U.S. government, when they sell their steel here.

The seller can choose between selling the steel for $75 (and taking a hit) or raising the price to $125 to maintain their same level of revenue. Most economists expect sellers to raise prices. It is the rational response.

3 Ways Trade Tariffs Could Impact Your Pocketbook

Let’s hear what folks on Wall Street and business leaders have to say about what these tariffs could mean for your pocketbook.

1. Higher Prices on Goods From Canned Goods to Cars

Americans should brace for higher prices.

“The problem is that they [tariffs] are bad for anyone else that uses that steel or aluminum, such as car manufacturers, builders, the energy industry, or really most of the economy. Their input costs have just gone up substantially. According to a UBS analyst, Ford’s costs just went up by $300 million, while GM’s went up by $200 million. Other companies will be similarly affected. Ford and GM (for example) have two choices here. They can raise prices, which will start to push inflation up higher, or they can eat the higher costs and make less money,” says Brad McMillan, Chief Investment Officer for Commonwealth Financial Network.

Others agree.

“A tariff is a tax, plain and simple. In this case, it’s an unnecessary tax on every American family and a self-inflicted wound on the nation’s economy. Consumers are just beginning to see more money in their paychecks following tax reform, but those gains will soon be offset by higher prices for products ranging from canned goods to cars to electronics,” said Matthew Shay, president and CEO of The National Retail Federation. 

2. The Steel Tariffs Are Bad For the Stock Market

“This is bad for the stock market, as it plays out across the economy. Both higher inflation and lower profits make stocks worth less,” McMillan says.

The stock market does not like uncertainty. “The tariffs may add only a penny in additional cost to Campbell’s Soup. But the cost to the macro economy via uncertainty and reduced investment could be much larger and highly relevant at the macro level. It could be a very expensive penny, so to say,” said Jens Nordvig founder and CEO of Exante Data.

3. Are the Steel Tariffs The Tip of the Iceberg?

This could be just the beginning. “The fear is that these tariffs are just a start to a longer game of tit-for-tat tariff retaliations and pose a fundamental threat to the rules-based trading system,” said Satyam Panday, senior U.S. economist, global economics & research at Standard & Poor’s.

“The tariffs may also be a warning shot for China, as the Trump administration prepares to make a decision on the country’s alleged abuse of intellectual property rights,” says John Lynch, chief investment strategist for LPL Financial.

What’s Next?

“The next several weeks will be important for trade policy. First, we will be looking for how strongly foreign governments respond to the new tariffs, specifically whether the response is proportional and whether President Trump will further escalate, as he has threatened. Said Lewis Alexander, U.S. chief economist at Nomura.

The Bottom Line

The tariffs will mean higher prices in a number of consumer goods for Americans. That means rising inflation. The more serious threat will be if other countries strike back with retaliatory measures. Prices could spike significantly higher for many items Americans have gotten used to buying cheaply and it could be a severe negative shock to the stock market.

“In the face of other fading tailwinds and rising headwinds, the economy and markets really don’t need more sudden changes that could very well be damaging. But it looks as though that is exactly what they are likely to get,” said McMillan.

Gold Is a Smart Portfolio Diversifier

In today’s environment with rising trade tensions and accelerated levels of inflation, investing in gold makes more sense than ever. Gold is a hard asset that rises in price over time. Gold is also a hedge against economic uncertainty and political strife and inflation.  A full-blown trade war could topple the stock market bear and in turn propel gold prices even higher. Now is the time to add gold to your portfolio. Risks are rising and gold is the answer to the economic storm that may lie ahead.

Warning! How you store bullion in your IRA matters.

A gold IRA is a self-directed individual retirement account in which the IRS allows ownership of physical precious metals. With a Gold IRA you can also hold physical precious metals in the form of coins and bars that meet certain fineness standards from the IRS.

At the end of your IRA term, you can walk away and take physical possession of your gold.

The United States government currently allows certain bullion and rare coins to be held in an IRA for retirement plans. The American Gold Eagle coin is one of several choices and is a popular IRA investment. The Gold Eagle was first issued in 1986 by the U.S. Mint and has become one of the most popular gold coins in the world. The quality and purity are guaranteed by the United States government.

There’s a lot of options of coins and bars you can purchase and store in an IRA. Here are just a few of the IRA-eligible options: 

• 1 oz. American Eagle Bullion Coins
• 1 oz. Canadian Maple Leaf Coins
• American Silver Eagles
• Gold and silver bars that are 99.9% pure or better

A Blanchard portfolio manager would be happy to discuss available options.

At Blanchard, we help thousands of clients every year properly purchase and store gold bullion in an IRA account that meets IRS requirements. It is an easy and simple 1-2-3 process that we outline here. This allows individual investors to protect and build their wealth for retirement in an asset that is known to hedge against inflation and protect your future purchasing power as a retiree.

Don’t Store It At Home

An IRS-approved custodian bank must hold gold added to an IRA. Blanchard has a longstanding relationship with GoldStar Trust Company, but Blanchard will gladly help you get set up with any IRS-approved custodial institution you choose.

Sadly, there are some dealers who have falsely promoted the concept that individual investors may hold bullion themselves through “check book IRAs.” Jeffrey M. Christian, managing partner of CPM Group and a widely respected expert on precious-metals investing, warns that this violates IRS guidelines.

“You may face taxes, penalties, and fees on your entire IRA should the IRS decide to call you on your self-storage of precious metals. And, the IRS has the ability to pursue investors doing this at any time. They know it is a violation that they can pursue whenever they want to,” Christian said.

Know Your Dealer

Blanchard is a long-established tangible assets firm with deep roots and integrity. Our portfolio managers develop long-term relationships with our clients and deep bonds of trust. It matters who you do business with. When you work with Blanchard, you are working with the best. You can count on your portfolio manager to work with you to educate you on the various facets and requirements of investing in bullion in your IRA.

Getting started with a Gold IRA is easier than you think. If you want to learn the facts around the ins-and-outs of investing in bullion in an IRA give Blanchard a call today.

Too often investors think of rising gold prices and a surging equities market as mutually exclusive. Are they right? A look at recent market fluctuations seems to indicate they aren’t.

Gold has long been deemed a “safe haven” asset; if the stock market falters or crashes gold will save them. If this is true, it stands to reason that the inverse is also the case. That is, if stocks are on fire, as they have been during the current multi-year bull run, then gold must drop. However, on a year-to-date basis gold has risen approximately 4.72%. How is this possible?

The answer might be that investors are willing to entertain two, separate outlooks simultaneously. For example, capital inflows to stocks likely stem from optimism surrounding tax reform, U.S. economic growth, international growth, and a low unemployment rate. At the same time, political tensions are on the rise. Unease about North Korea looms large.

For example, in late August of 2017, gold saw an increase amid saber rattling between Trump and North Korean leader Kim Jong Un. “Gold is being supported by the war games and the uncertainty in Washington,” remarked one analyst with Saxo Bank at the time.

Simultaneously, these gold investors have an eye on the value of the dollar. As the U.S. dollar falls in purchasing power relative to other currencies, gold often increases exhibiting an inverse relationship. Today, gold is up about 6% since mid-December. Some are citing increased concerns of looming inflation. Traditionally, gold has been something of a hedge against inflation. Therefore, despite its increase over the last few months, some expect it to go higher.

All of these various factors are supporting a “perfect storm” characterized by strong opportunities for both gold investors and equity investors. Meanwhile, just as political tensions have some equity investors hedging their bets, many are also questioning valuations as an already hot market grow hotter. Research firm Advisor Perspectives asked investment advisors about their outlooks for stocks and “Among the 505 who provided estimates, more than half expect large U.S. stocks to earn an average of at least 5% annually over the next decade. More than an eighth of these advisers expect stocks to return at least 8% annually” Simply put: the party might not be over just yet.

More importantly, the life of the equities party doesn’t mean the death of the gold party. Investors are learning they can have both.

Even if this curious case of synergy ends, well-diversified investors with a long-term outlook are likely to be pleased. With a long enough horizon anyone can outlast tumultuous, unpredictable markets. This is important to remember because the unpredictability of a rising equities/gold market can be as fun as a falling equities/gold market can be depressing. Clearly this is a time to be in the market and off the sidelines.